'33 Act File No. 333-40455
'40 Act File No. 811-08495
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2007
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 86 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 87 [X]
(Check appropriate box or boxes)
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GARTMORE MUTUAL FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1200 RIVER ROAD
CONSHOHOCKEN, PENNSYLVANIA 19428
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Registrant's Telephone Number, including Area Code: (484) 530-1300
Send Copies of Communications to:
ALLAN J. OSTER, ESQ. BARBARA A. NUGENT, ESQ. 1200 RIVER ROAD, SUITE 1000 STRADLEY RONON STEVENS & YOUNG, LLP CONSHOHOCKEN, PENNSYLVANIA 19428 2600 ONE COMMERCE SQUARE (NAME AND ADDRESS OF AGENT FOR SERVICE) PHILADELPHIA, PENNSYLVANIA 19103 |
It is proposed that this filing will become effective: (check appropriate box)
[x] immediately upon filing pursuant to paragraph (b)
[ ] on [date] 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 designated a new effective date for a
previously filed post-effective amendment.
CORE ASSET ALLOCATION Series
Gartmore Investor Destinations Aggressive Fund Gartmore Investor Destinations Moderately Aggressive Fund Gartmore Investor Destinations Moderate Fund Gartmore Investor Destinations Moderately Conservative Fund Gartmore Investor Destinations Conservative Fund
[LOGO] Gartmore Funds
Fund PROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
CORE ASSET ALLOCATION Series
These risk-based, diversified asset allocation Funds feature an indexing approach to asset allocation.
FUND AND CLASS TICKER ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Aggressive Fund Class A NDAAX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Aggressive Fund Class B NDABX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Aggressive Fund Class C NDACX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Aggressive Fund Class R GAFRX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Aggressive Fund Institutional Class GAIDX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Aggressive Fund Service Class NDASX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Aggressive Fund Class A NDMAX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Aggressive Fund Class B NDMBX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Aggressive Fund Class C NDMCX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Aggressive Fund Class R GMARX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Aggressive Fund Institutional Class GMIAX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Aggressive Fund Service Class NDMSX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderate Fund Class A NADMX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderate Fund Class B NBDMX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderate Fund Class C NCDMX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderate Fund Class R GMDRX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderate Fund Institutional Class GMDIX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderate Fund Service Class NSDMX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Conservative Fund Class A NADCX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Conservative Fund Class B NBDCX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Conservative Fund Class C NCDCX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Conservative Fund Class R GMMRX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Conservative Fund Institutional Class GMIMX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Moderately Conservative Fund Service Class NSDCX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Conservative Fund Class A NDCAX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Conservative Fund Class B NDCBX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Conservative Fund Class C NDCCX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Conservative Fund Class R GCFRX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Conservative Fund Institutional Class GIMCX ----------------------------------------------------------------------------------------- Gartmore Investor Destinations Conservative Fund Service Class NDCSX ----------------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 SECTION 1: FUND SUMMARIES AND PERFORMANCE
Gartmore Investor Destinations Aggressive Fund
Gartmore Investor Destinations Moderately Aggressive Fund
Gartmore Investor Destinations Moderate Fund
Gartmore Investor Destinations Moderately Conservative Fund
Gartmore Investor Destinations Conservative Fund
14 SECTION 2: FUND DETAILS
Additional Information about Investments, Investment Strategies and Risks
15 SECTION 3: FUND MANAGEMENT
Investment Adviser and Subadviser
Portfolio Management
Multi-Manager Structure
17 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
29 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other Tax-Deferred Accounts
Backup Withholding
31 SECTION 6: FINANCIAL HIGHLIGHTS
37 APPENDIX: DESCRIPTION OF UNDERLYING INVESTMENTS
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GARTMORE CORE ASSET ALLOCATION SERIES | 1
CORE ASSET ALLOCATION Series
INTRODUCTION TO THE CORE ASSET ALLOCATION SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT THE FIVE GARTMORE INVESTOR DESTINATIONS FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"). THE FUNDS ARE DESIGNED TO PROVIDE BROADLY DIVERSIFIED INVESTMENT OPTIONS ACROSS A RANGE OF RISK LEVELS. EACH FUND IS A "FUND OF FUNDS" THAT INVESTS PRIMARILY IN AFFILIATED INDEX MUTUAL FUNDS AND SHORT-TERM INVESTMENTS REPRESENTING A VARIETY OF ASSET CLASSES.
Gartmore Investor Destinations Aggressive Fund Gartmore Investor Destinations Moderately Aggressive Fund Gartmore Investor Destinations Moderate Fund Gartmore Investor Destinations Moderately Conservative Fund Gartmore Investor Destinations Conservative Fund
THESE FUNDS ARE PRIMARILY INTENDED TO PROVIDE A SOLUTION FOR INVESTORS SEEKING:
o to achieve their financial objectives through a professionally developed asset allocation program and
o to maximize long-term total returns at a given level of risk through broad diversification among several traditional asset classes.
To decide which of these Funds is appropriate for your investment program, you should consider your personal investment objective and financial circumstances, the length of time until you need your money and the amount of risk you are comfortable assuming.
As with any mutual fund, there can be no guarantee that any of the Funds will meet their respective objectives or that the Funds' performance will be positive for any period of time.
Each Funds investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
Each Fund has six different share classes--Class A, Class B, Class C, Class R, Service Class and Institutional Class. An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Although each Fund is currently managed by Gartmore Mutual Fund Capital Trust (the "Adviser"), each Fund may employ a "multi-manager" structure, which means that the Adviser, as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interests and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies and marketing materials related to them will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
INVESTMENT OBJECTIVES
Each Fund seeks to maximize total investment return for a given level of risk.
PRINCIPAL STRATEGIES
The Funds aim to provide diversification across major asset classes--U.S. stocks, international stocks, bonds and short-term investments--by investing in a professionally selected mix of underlying portfolios of Gartmore Mutual Funds, unaffiliated mutual funds and a fixed interest contract issued and guaranteed by Nationwide Life Insurance Company (each, an "Underlying Fund" or collectively, "Underlying Funds"). Depending on its target risk level, each Fund invests different amounts in these asset classes and Underlying Funds.
The Funds invest primarily in index funds offered by Gartmore Mutual Funds, representing several asset classes. The index funds invest directly in equity securities, bonds or other securities with a goal of obtaining investment returns that closely track those of the relevant stock or bond index. The Funds also invest in certain non-index Underlying Funds.
You could purchase most of the Underlying Funds directly. However, the Funds offer the added benefits of professional asset allocation and an extra measure of diversification.
GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND
The Aggressive Fund pursues its objective primarily by seeking growth of capital. The Aggressive Fund's target allocation is heavily weighted toward U.S. and international stock investments, with a small allocation to bonds.
This Fund may be appropriate for investors who:
o are comfortable with substantial investment risk;
o have a long investment time horizon and
o seek to maximize long-term returns while accepting the possibility of significant short-term or even long-term losses.
GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
The Moderately Aggressive Fund pursues its objective primarily by seeking growth of capital, as well as income. The Moderately Aggressive Fund's target allocation is significantly weighted toward U.S. and international stock investments, but also includes some bonds and short-term investments to reduce volatility.
This Fund may be appropriate for investors who:
o are comfortable with significant investment risk;
o have a long investment time horizon;
o seek additional diversification and
o seek to maximize long-term returns while accepting the possibility of short-term or even long-term losses.
GARTMORE INVESTOR DESTINATIONS MODERATE FUND
The Moderate Fund pursues its objective by seeking both growth of capital and income. The Moderate Fund's target allocation is weighted toward U.S. and international stock investments, but also includes a significant portion in bonds and short-term investments to add income and reduce volatility.
This Fund may be appropriate for investors who:
o have a lower tolerance for risk than more aggressive investors;
o seek both growth and income from their investment and
o are willing to accept moderate short-term price fluctuations in exchange for potentially higher returns over time.
GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
The Moderately Conservative Fund pursues its objective by seeking income and, secondarily, long-term growth of capital. The Moderately Conservative Fund's target allocation is weighted toward bonds and short-term investments, but also includes a significant portion in stock investments for long-term growth.
This Fund may be appropriate for investors who:
o have a lower tolerance for risk than more aggressive investors;
o primarily seek income from their investment;
o have a shorter investment time horizon and
o are willing to accept some short-term price fluctuations in exchange for potentially higher income and growth.
GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND
The Conservative Fund pursues its objective by seeking income and, secondarily, long-term growth of capital. The Conservative Fund's target allocation is heavily weighted toward bonds and short-term investments, while including some stocks for long-term growth.
This Fund may be appropriate for investors who:
o have a short investment time horizon;
o have a low tolerance for risk and
o primarily seek income from their investment.
GARTMORE CORE ASSET ALLOCATION SERIES | 3
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
The Adviser establishes a target allocation range among different asset classes based on each Fund's risk profile and individual strategies. Within each target asset class allocation range, the Adviser selects the Underlying Funds, and the percentage of the Fund's assets that will be allocated to each such Underlying Fund. The Adviser reviews the allocations among both asset classes and Underlying Funds on a routine basis. The Adviser may make changes to these allocation ranges from time to time as appropriate given the risk profile and individual strategies of each Fund and in order to achieve each Fund's investment objective.
Listed in the table below are the asset classes and Underlying Funds in which the Funds currently may invest and their target allocation ranges for each Fund that have been established by the Adviser as of February 28, 2007. While this table is intended to provide a depiction of the kinds of securities and the general proportions in which each Fund currently invests, over time these target asset class and Underlying Fund allocations may change as economic and/or market conditions warrant in order for each Fund to continue to meet its objective. Even where the target allocation ranges themselves do not change, actual allocations may vary from an established target over the short term. Until a target allocation range is itself changed, day-to-day market activity may cause a Fund's asset allocations to "drift" from the target. Under ordinary circumstances, the Adviser will rebalance the assets of each Fund each quarter in order to conform its actual allocations to the target allocations applicable at that time. THE FUNDS DO NOT NECESSARILY INVEST IN EVERY ASSET CLASS OR ALL OF THE UNDERLYING FUNDS. THE FUNDS MAY ALSO INVEST IN OTHER MUTUAL FUNDS CHOSEN TO COMPLEMENT OR REPLACE THE UNDERLYING FUNDS LISTED HERE.
THE FUNDS RESERVE THE RIGHT TO CHANGE THE TARGET ALLOCATION RANGES AT ANY TIME AND WITHOUT NOTICE. FOR FUTURE INFORMATION ABOUT ASSET CLASS AND UNDERLYING FUND ALLOCATIONS, PLEASE REVIEW THE FUNDS' ANNUAL AND SEMI-ANNUAL REPORTS.
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ASSET CLASSES AND
UNDERLYING INVESTMENTS TARGET ALLOCATION RANGES+
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MODERATELY MODERATELY
AGGRESSIVE AGGRESSIVE MODERATE CONSERVATIVE CONSERVATIVE
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U.S. STOCKS 60-70% 50-60% 40-50% 25-35% 10-20%
U.S. LARGE CAP
Gartmore S&P 500 Index Fund 35-45% 30-40% 25-35% 15-25% 5-15%
U.S. MID CAP
Gartmore Mid Cap Market Index Fund 10-20% 10-20% 5-15% 5-15% 0-10%
U.S. SMALL CAP
Gartmore Small Cap Index Fund 5-15% 0-10% 0-10% 0-10% 0-10%
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INTERNATIONAL STOCKS 25-35% 20-30% 10-20% 5-15% 0-10%
Gartmore International Index Fund 25-35% 20-30% 10-20% 5-15% 0-10%
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BONDS 0-10% 15-25% 30-40% 45-55% 60-70%
Gartmore Bond Index Fund 0-10% 10-20% 20-30% 30-40% 35-45%
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SHORT-TERM BONDS 0-10% 0-10% 5-15% 10-20% 20-30%
Nationwide Contract 0-10% 0-10% 5-15% 10-20% 20-30%
Gartmore Short Duration Bond Fund 0-10% 0-10% 0-10% 0-10% 0-10%
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SHORT-TERM INVESTMENTS 0-10% 0-10% 0-10% 5-15% 5-15%
Gartmore Enhanced Income Fund 0-10% 0-10% 0-10% 5-15% 5-15%
Gartmore Money Market Fund 0-10% 0-10% 0-10% 0-10% 0-10%
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4 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
PRINCIPAL RISKS
None of the Investor Destinations Funds can guarantee that it will achieve its investment objective.
As with any mutual fund, the value of each Fund's investments--and therefore, the value of each Fund's shares--may fluctuate. These changes may occur because of the following risks:
RISKS ASSOCIATED WITH THE INVESTOR DESTINATIONS FUNDS
ASSET ALLOCATION RISK - Each Investor Destinations Fund is subject to different levels and combinations of risk, based on its actual allocation among the various asset classes and Underlying Funds. Each Investor Destinations Fund will be affected to varying degrees by stock and bond market risks, among others. The potential impact of the risks related to an asset class depends on the size of the Investor Destinations Fund's investment allocation to any such class.
PERFORMANCE RISK - Each Investor Destinations Fund's investment performance is directly tied to the performance of the Underlying Funds in which each Investor Destinations Fund invests. If one or more of the Underlying Funds fails to meet its investment objective, the Investor Destinations Funds' performance could be negatively affected. There can be no assurance that any Investor Destinations Fund or Underlying Fund will achieve its investment objective.
RISKS ASSOCIATED WITH INDEX FUNDS
Underlying Funds that seek to match the performance of an index may not fully replicate their respective indexes and may perform differently from the securities in the index. To minimize this possibility, index funds attempt to be fully invested at all times and generally do not hold a significant portion of their assets in cash. Since they generally do not attempt to hedge against market declines, they may fall in value more than other mutual funds in the event of a general market decline. In addition, unlike an index fund, an index has no operating or other expenses. As a result, even though index funds attempt to track their indexes as closely as possible, they will tend to underperform the indexes to some degree over time.
RISKS ASSOCIATED WITH STOCKS
STOCK MARKET RISK refers to the possibility that an Underlying Fund could lose value if the individual stocks in which the Underlying Fund has invested and/or the overall stock markets in which those stocks trade decline. Individual stocks and overall stock markets may experience short-term volatility (price fluctuation) as well as extended periods of decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
MID-CAP AND SMALL-CAP RISK - Investments in medium-sized and smaller, newer companies may involve greater risk than investments in larger, more established companies because their stocks are usually less stable in price and less liquid. To the extent an Underlying Fund invests in stocks of small and mid-sized companies, it may be subject to increased risk.
RISKS ASSOCIATED WITH INTERNATIONAL STOCKS
FOREIGN RISK is the risk that foreign securities may be more volatile, harder to price, and less liuid than U.S. securities. Foreign investments involve the following risks in addition to those of U.S. investments:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities and the possible seizure, nationalization or expropriation of the foreign issuer or foreign deposits (in which the Underlying Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls.
GARTMORE CORE ASSET ALLOCATION SERIES | 5
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
RISKS ASSOCIATED WITH BONDS AND SHORT-TERM INVESTMENTS
INTEREST RATE RISK is the risk that the value of debt securities held by an Underlying Fund may decrease when market interest rates rise. In general, prices of debt securities decline when interest rates rise and increase when interest rates fall. Typically, the longer the maturity of a debt security, the more sensitive the debt security's price will be to interest rate changes.
CREDIT RISK is the risk that the issuer of a debt security will not make required interest payments and/or principal repayments when they are due. In addition, if an issuer's financial condition changes, the ratings on the issuer's debt securities may be lowered, which could negatively affect the prices of the securities an Underlying Fund owns. This risk is particularly high for high-yield bonds and lower rated convertible securities.
SINGLE ISSUER RISK refers to the risk presented by the Nationwide Contract, which is a fixed interest contract issued and guaranteed by Nationwide Life Insurance Company ("Nationwide"). This contract has a stable principal value and pays a fixed rate of interest to each Fund that holds the contract. Both the principal and a minimum rate of interest are guaranteed by Nationwide regardless of market conditions. However, if Nationwide becomes unable to meet this guarantee, a Fund that invests in the contract may lose money from unpaid principal or unpaid or reduced interest. Because the entire contract is issued and guaranteed by a single issuer, the financial health of such issuer may have a greater impact on the value of a Fund that invests in it.
INFLATION RISK is the risk that prices of existing fixed-rate debt securities will decline due to inflation or the threat of inflation. The income produced by these securities is worth less when prices for goods and services rise. To compensate for this loss of purchasing power, the securities trade at lower prices. Inflation also reduces the purchasing power of any income you receive from an Underlying Fund.
EXTENSION RISK is the risk that principal repayments will not occur as quickly as anticipated, causing the expected maturity of a security to increase. Rapidly rising interest rates may cause prepayments to occur more slowly than expected, thereby lengthening the duration of the securities held by the Underlying Fund and making their prices more sensitive to rate changes and more volatile.
PREPAYMENT RISK is the risk that as interest rates decline debt issuers may repay or refinance their loans or obligations earlier than anticipated. The issuers of mortgage- and asset-backed securities may, therefore, repay principal in advance. This forces an Underlying Fund to reinvest the proceeds from the principal prepayments at lower prevailing interest rates, which reduces the Underlying Fund's income.
In addition, changes in prepayment levels can increase the volatility of prices and yields on mortgage- and asset-backed securities. If an Underlying Fund pays a premium (a price higher than the principal amount of the bond) for a mortgage- or asset-backed security and that security is prepaid, the Underlying Fund may not recover the premium, resulting in a capital loss.
6 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
PERFORMANCE
The bar charts and tables appearing on pages 7-9 can help you evaluate for each Fund both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS -
AGGRESSIVE FUND CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------ -11.42% -18.37% 31.97% 14.05% 7.89% 17.03% |
BEST QUARTER: 16.78% - 2ND QTR OF 2003
WORST QUARTER: -17.89% - 3RD QTR OF 2002
ANNUAL TOTAL RETURNS -
MODERATELY AGGRESSIVE FUND CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------ -8.69% -14.37% 26.46% 12.22% 7.15% 14.56% |
BEST QUARTER: 13.89% - 2ND QTR OF 2003
WORST QUARTER: -14.39% - 3RD QTR OF 2002
ANNUAL TOTAL RETURNS -
MODERATE FUND CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------ -4.89% -9.47% 20.01% 9.53% 5.50% 11.50% |
BEST QUARTER: 10.62% - 2ND QTR OF 2003
WORST QUARTER: -10.24% - 3RD QTR OF 2002
ANNUAL TOTAL RETURNS -
MODERATELY CONSERVATIVE FUND CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------ -1.23% -4.20% 13.59% 7.18% 4.52% 8.55% |
BEST QUARTER: 7.26% - 2ND QTR OF 2003
WORST QUARTER: -5.83% - 3RD QTR OF 2002
ANNUAL TOTAL RETURNS -
CONSERVATIVE FUND CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------ 2.20% 0.55% 7.87% 4.80% 3.27% 6.26% |
BEST QUARTER: 4.16% - 2ND QTR OF 2003
WORST QUARTER: -2.09% - 3RD QTR OF 2002
GARTMORE CORE ASSET ALLOCATION SERIES | 7
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
After-tax returns are shown in the tables for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
SINCE INCEPTION
1 YEAR 5 YEARS (MAR. 31, 2000)
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Class A shares - Before Taxes 10.29% 7.90% 2.36%
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Class A shares -
After Taxes on Distributions 9.55% 7.39% 1.93%
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Class A shares - After Taxes on
Distributions and Sales of Shares 7.21% 6.65% 1.83%
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Class B shares - Before Taxes 11.16% 8.11% 2.54%
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Class C shares - Before Taxes(2, 3) 15.19% 8.39% 2.53%
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Class R shares - Before Taxes(3) 16.74% 8.81% 2.82%
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Service Class shares - Before Taxes 16.83% 9.07% 3.20%
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Institutional Class shares - Before Taxes(4) 17.32% 9.31% 3.37%
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Standard & Poor's (S&P) 500 Index(5) 15.79% 6.19% 0.83%
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Aggressive Fund Composite Index(6) 15.20% 6.18% 1.15%
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MODERATELY AGGRESSIVE FUND
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (MAR. 31, 2000)
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Class A shares - Before Taxes 8.00% 7.05% 2.74%
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Class A shares - After Taxes
on Distributions 7.22% 6.47% 2.22%
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Class A shares - After Taxes on
Distributions and Sales of Shares 5.73% 5.84% 2.10%
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Class B shares - Before Taxes 8.73% 7.22% 2.90%
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Class C shares - Before Taxes(2, 3) 12.83% 7.60% 2.95%
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Class R shares - Before Taxes(3) 14.29% 7.90% 3.17%
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Service Class shares - Before Taxes 14.44% 8.22% 3.59%
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Institutional Class shares - Before Taxes(4) 14.86% 8.40% 3.71%
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S&P 500 Index(5) 15.79% 6.19% 0.83%
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Moderately Aggressive Fund
Composite Index(7) 13.46% 5.98% 1.94%
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MODERATE FUND
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (MAR. 31, 2000)
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Class A shares - Before Taxes 5.04% 5.69% 2.99%
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Class A shares -
After Taxes on Distributions 4.13% 4.95% 2.28%
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Class A shares - After Taxes on
Distributions and Sales of Shares 3.76% 4.53% 2.18%
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Class B shares - Before Taxes 5.69% 5.83% 3.16%
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Class C shares - Before Taxes(2, 3) 9.74% 6.13% 3.15%
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Class R shares - Before Taxes(3) 11.23% 6.49% 3.41%
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Service Class shares - Before Taxes 11.39% 6.82% 3.83%
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Institutional Class shares -
Before Taxes(4) 11.79% 7.02% 3.98%
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S&P 500 Index(5) 15.79% 6.19% 0.83%
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Moderate Fund Composite Index(8) 11.18% 5.55% 2.79%
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MODERATELY CONSERVATIVE FUND
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
(SINCE INCEPTION
1 YEAR 5 YEARS (MAR. 31, 2000)
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Class A shares - Before Taxes 2.31% 4.52% 3.10%
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Class A shares - After Taxes
on Distributions 1.14% 3.56% 2.10%
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Class A shares - After Taxes on
Distributions and Sales of Shares 2.04% 3.39% 2.10%
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Class B shares - Before Taxes 2.79% 4.72% 3.33%
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Class C shares - Before Taxes(2, 3) 6.80% 5.05% 3.33%
-----------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 8.38% 5.48% 3.64%
-----------------------------------------------------------------------------------
Service Class shares - Before Taxes 8.50% 5.69% 3.98%
-----------------------------------------------------------------------------------
Institutional Class shares - Before Taxes(4) 8.89% 5.90% 4.14%
-----------------------------------------------------------------------------------
Lehman Brothers (LB) U.S.
Aggregate Index(9) 4.33% 5.06% 6.36%
-----------------------------------------------------------------------------------
Moderately Conservative Fund
Composite Index(10) 8.94% 5.05% 3.56%
-----------------------------------------------------------------------------------
|
8 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
CONSERVATIVE FUND
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (MAR. 31, 2000)
----------------------------------------------------------------------------------
Class A shares - Before Taxes 0.13% 3.28% 3.05%
----------------------------------------------------------------------------------
Class A shares -
After Taxes on Distributions -1.07% 2.20% 1.89%
----------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares 0.39% 2.22% 1.94%
----------------------------------------------------------------------------------
Class B shares - Before Taxes 0.49% 3.43% 3.25%
----------------------------------------------------------------------------------
Class C shares - Before Taxes(2, 3) 4.50% 3.77% 3.24%
----------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 6.11% 4.17% 3.54%
----------------------------------------------------------------------------------
Service Class shares - Before Taxes 6.11% 4.42% 3.91%
----------------------------------------------------------------------------------
Institutional Class shares - Before Taxes(4) 6.61% 4.66% 4.09%
----------------------------------------------------------------------------------
LB U.S. Aggregate Index(9) 4.33% 5.06% 6.36%
----------------------------------------------------------------------------------
Conservative Fund Composite Index(11) 6.76% 4.21% 3.92%
----------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charges.
3 Returns before the first offering of Class C shares (3/1/01) and Class R shares (10/1/03) are based on the previous performance of Class B shares. This performance is substantially similar to what Class C and Class R shares would have produced because all classes invest in the same portfolio of securities. Class C performance has been adjusted to reflect applicable sales charges. Class R performance has been adjusted to eliminate sales charges that do not apply to that class, but has not been adjusted to reflect any lower expenses.
4 Returns before the first offering of Institutional Class shares (12/29/04) are based on the previous performance of Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because all classes invest in the same portfolio of securities. Returns for the Institutional Class have not been adjusted to reflect its lower expenses.
5 The S&P 500(R) Index, the Fund's primary index, is an unmanaged market capitalization-weighted index of 500 stocks of large-cap U.S. companies that gives a broad look at how the stock prices of those companies have performed. An index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
6 The Aggressive Fund Composite Index is an unmanaged, hypothetical combination of the S&P 500 Index (95%) and the Lehman Brothers U.S. Aggregate Index (5%). An index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
7 The Moderately Aggressive Fund Composite Index is an unmanaged, hypothetical combination of the S&P 500 Index (80%), the Lehman Brothers U.S. Aggregate Index (15%), and the Citigroup 3-Month T-Bill Index (5%). An index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
8 The Moderate Fund Composite Index is an unmanaged, hypothetical combination of the S&P 500 Index (60%), the Lehman Brothers U.S. Aggregate Index (25%) and the Citigroup 3-Month T-Bill Index (15%). An index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
9 The Lehman Brothers U.S. Aggregate Index, the Fund's primary index, is an unmanaged market value-weighted index of investment-grade, fixed rate debt issues (including government, corporate, asset-backed and mortgage-backed securities with maturities of one year or more) that is generally representative of the bond market as a whole. An index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
10 The Moderately Conservative Fund Composite Index is an unmanaged, hypothetical combination of the Lehman Brothers U.S. Aggregate Index (35%), the Citigroup 3-Month T-Bill Index (25%) and the S&P 500 Index (40%). An index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
11 The Conservative Fund Composite Index is an unmanaged, hypothetical combination of the Citigroup 3-Month T-Bill Index (45%), the Lehman Brothers U.S. Aggregate Index (35%) and the S&P 500 Index (20%). An index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE ASSET ALLOCATION SERIES | 9
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
FEES AND EXPENSES
These tables describe the direct fees and expenses you may pay if you buy and hold shares of the Funds, depending on the share class you select. These tables also reflect the proportion of the Underlying Funds' expenses you may pay indirectly through ownership of shares of the Funds. See Section 2, Fund Details for more information.
AGGRESSIVE FUND
SHAREHOLDER FEES (PAID DIRECTLY SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ |
DIRECT ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE SERVICE CLASS INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% 0.25% None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(6) 0.07% 0.06% 0.06% 0.26% 0.21% 0.06% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT ANNUAL FUND OPERATING EXPENSES(7) 0.45% 1.19% 1.19% 0.89% 0.59% 0.19% ------------------------------------------------------------------------------------------------------------------------------------ ACQUIRED FUND (I.E., INDIRECT ANNUAL UNDERLYING FUND) OPERATING EXPENSES(8) 0.30% 0.30% 0.30% 0.30% 0.30% 0.30% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND ANNUAL OPERATING EXPENSES 0.75% 1.49% 1.49% 1.19% 0.89% 0.49% ------------------------------------------------------------------------------------------------------------------------------------ |
MODERATELY AGGRESSIVE FUND
SHAREHOLDER FEES (PAID DIRECTLY SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ |
DIRECT ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE SERVICE CLASS INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% 0.25% None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(6) 0.08% 0.06% 0.06% 0.26% 0.21% 0.06% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT ANNUAL FUND OPERATING EXPENSES(7) 0.46% 1.19% 1.19% 0.89% 0.59% 0.19% ------------------------------------------------------------------------------------------------------------------------------------ ACQUIRED FUND (I.E., INDIRECT ANNUAL UNDERLYING FUND) OPERATING EXPENSES(8) 0.29% 0.29% 0.29% 0.29% 0.29% 0.29% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND ANNUAL OPERATING EXPENSES 0.75% 1.48% 1.48% 1.18% 0.88% 0.48% ------------------------------------------------------------------------------------------------------------------------------------ |
10 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
MODERATE FUND
SHAREHOLDER FEES (PAID DIRECTLY SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ |
DIRECT ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE SERVICE CLASS INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% 0.25% None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(6) 0.09% 0.06% 0.06% 0.26% 0.18% 0.06% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT ANNUAL FUND OPERATING EXPENSES(7) 0.47% 1.19% 1.19% 0.89% 0.56% 0.19% ------------------------------------------------------------------------------------------------------------------------------------ ACQUIRED FUND (I.E., INDIRECT ANNUAL UNDERLYING FUND) OPERATING EXPENSES(8) 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND 0.75% 1.47% 1.47% 1.17% 0.84% 0.47% ANNUAL OPERATING EXPENSES ------------------------------------------------------------------------------------------------------------------------------------ |
MODERATELY CONSERVATIVE FUND
SHAREHOLDER FEES (PAID DIRECTLY SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ |
DIRECT ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE SERVICE CLASS INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% Fund's investments professionally managed) ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% 0.25% None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(6) 0.10% 0.07% 0.07% 0.27% 0.22% 0.07% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT ANNUAL FUND OPERATING EXPENSES(7) 0.48% 1.20% 1.20% 0.90% 0.60% 0.20% ------------------------------------------------------------------------------------------------------------------------------------ ACQUIRED FUND (I.E., INDIRECT ANNUAL UNDERLYING FUND) OPERATING EXPENSES(8) 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND ANNUAL OPERATING EXPENSES 0.76% 1.48% 1.48% 1.18% 0.88% 0.48% ------------------------------------------------------------------------------------------------------------------------------------ |
GARTMORE CORE ASSET ALLOCATION SERIES | 11
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
CONSERVATIVE FUND
SHAREHOLDER FEES (PAID DIRECTLY SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ |
DIRECT ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE SERVICE CLASS INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% 0.25% None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(6) 0.10% 0.09% 0.09% 0.29% 0.23% 0.09% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT ANNUAL FUND OPERATING EXPENSES(7) 0.48% 1.22% 1.22% 0.92% 0.61% 0.22% ------------------------------------------------------------------------------------------------------------------------------------ ACQUIRED FUND (I.E., INDIRECT ANNUAL UNDERLYING FUND) OPERATING EXPENSES(8) 0.27% 0.27% 0.27% 0.27% 0.27% 0.27% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND ANNUAL OPERATING EXPENSES 0.75% 1.49% 1.49% 1.19% 0.88% 0.49% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class-Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.15% will apply to
redemptions of Class A shares if purchased without sales charges and for
which a finders fee is paid. Section 4, Investing with Gartmore Funds:
Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class-Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class-Class C Shares.
6 "Other Expenses" include administrative services fees which currently are permitted to be up to 0.25% with respect to Class A, Class R and Service Class shares. For the fiscal year ended October 31, 2006, administrative services fees were 0.01%, 0.02%, 0.03%, 0.03% and 0.01% for Class A shares, 0.20%, 0.20%, 0.20%, 0.20% and 0.20% for Class R shares and 0.15%, 0.15%, 0.12%, 0.15% and 0.14% for Service Class shares of the Aggressive, Moderately Aggressive, Moderate, Moderately Conservative and Conservative Funds, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses for the shares of each Class of each Fund to 0.25% until at least February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles, expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided however, that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Direct Annual Fund Operating Expenses" could increase to 0.75%, 0.75%, 0.75%,0.75% and 0.75% for Class A shares, 1.00%, 1.00%, 1.00%, 1.00% and 1.00% for Class R shares and 0.75%, 0.75%, 0.75%, 0.75% and 0.75% for Service Class shares of the Aggressive, Moderately Aggressive, Moderate, Moderately Conservative and Conservative Funds, respectively, before the Adviser would be required to further limit the Fund's expenses.
8 Because the Funds invest primarily in other Gartmore Funds, they are shareholders of those Underlying Funds. The Underlying Funds do not charge the Funds any sales charge for buying or selling shares. However, the Funds indirectly pay a portion of the operating expenses, including management fees of the Underlying Funds. These expenses are deducted from the Underlying Funds before their share prices are calculated and are in addition to the fees and expenses described in the fee tables above. Actual indirect expenses vary depending on how each Fund's assets are spread among the underlying investments.
12 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 1 GARTMORE CORE ASSET ALLOCATION SERIES FUND SUMMARIES AND PERFORMANCE
(CONT.)
EXAMPLE
This Example is intended to help you compare the cost of investing in a Fund with the cost of investing in other mutual funds. The Example also reflects the fees of the Underlying Funds.
The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses, and the expense limitations for one year only (if applicable). 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
-----------------------------------------------------------------------------
AGGRESSIVE FUND
-----------------------------------------------------------------------------
Class A shares* $647 $801 $ 968 $1,452
-----------------------------------------------------------------------------
Class B shares 652 771 1,013 1,485
-----------------------------------------------------------------------------
Class C shares 252 471 813 1,779
-----------------------------------------------------------------------------
Class R shares 121 378 654 1,443
-----------------------------------------------------------------------------
Service Class shares 91 284 493 1,096
-----------------------------------------------------------------------------
Institutional Class shares 50 157 274 616
-----------------------------------------------------------------------------
MODERATELY AGGRESSIVE FUND
-----------------------------------------------------------------------------
Class A shares* $647 $801 $ 968 $1,452
-----------------------------------------------------------------------------
Class B shares 651 768 1,008 1,478
-----------------------------------------------------------------------------
Class C shares 251 468 808 1,768
-----------------------------------------------------------------------------
Class R shares 120 375 649 1,432
-----------------------------------------------------------------------------
Service Class shares 90 281 488 1,084
-----------------------------------------------------------------------------
Institutional Class shares 49 154 269 604
-----------------------------------------------------------------------------
MODERATE FUND
-----------------------------------------------------------------------------
Class A shares* $647 $801 $ 968 $1,452
-----------------------------------------------------------------------------
Class B shares 650 765 1,003 1,470
-----------------------------------------------------------------------------
Class C shares 250 465 803 1,757
-----------------------------------------------------------------------------
Class R shares 119 372 644 1,420
-----------------------------------------------------------------------------
Service Class shares 86 268 466 1,037
-----------------------------------------------------------------------------
Institutional Class shares 48 151 263 591
-----------------------------------------------------------------------------
MODERATELY CONSERVATIVE FUND
-----------------------------------------------------------------------------
Class A shares* $648 $804 $ 973 $1,463
-----------------------------------------------------------------------------
Class B shares 651 768 1,008 1,482
-----------------------------------------------------------------------------
Class C shares 251 468 808 1,768
-----------------------------------------------------------------------------
Class R shares 120 375 649 1,432
-----------------------------------------------------------------------------
Service Class shares 90 281 488 1,084
-----------------------------------------------------------------------------
Institutional Class shares 49 154 269 604
-----------------------------------------------------------------------------
CONSERVATIVE FUND
-----------------------------------------------------------------------------
Class A shares* $647 $801 $ 968 $1,452
-----------------------------------------------------------------------------
Class B shares 652 771 1,013 1,485
-----------------------------------------------------------------------------
Class C shares 252 471 813 1,779
-----------------------------------------------------------------------------
Class R shares 121 378 654 1,443
-----------------------------------------------------------------------------
Service Class shares 90 281 488 1,084
-----------------------------------------------------------------------------
Institutional Class shares 50 157 274 616
-----------------------------------------------------------------------------
|
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------------------------------
AGGRESSIVE FUND
-----------------------------------------------------------------------------
Class B shares $152 $471 $ 813 $1,485
-----------------------------------------------------------------------------
Class C shares 152 471 813 1,779
-----------------------------------------------------------------------------
MODERATELY AGGRESSIVE FUND
-----------------------------------------------------------------------------
Class B shares $151 $468 $ 808 $1,478
-----------------------------------------------------------------------------
Class C shares 151 468 808 1,768
-----------------------------------------------------------------------------
MODERATE FUND
-----------------------------------------------------------------------------
Class B shares $152 $471 $ 813 $1,493
-----------------------------------------------------------------------------
Class C shares 152 471 813 1,779
-----------------------------------------------------------------------------
MODERATELY CONSERVATIVE FUND
-----------------------------------------------------------------------------
Class B shares $150 $465 $ 803 $1,470
-----------------------------------------------------------------------------
Class C shares 150 465 803 1,757
-----------------------------------------------------------------------------
CONSERVATIVE FUND
-----------------------------------------------------------------------------
Class B shares $152 $471 $ 813 $1,485
-----------------------------------------------------------------------------
Class C shares 152 471 813 1,779
-----------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CORE ASSET ALLOCATION SERIES | 13
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT STRATEGIES AND RISKS
INVESTMENT STRATEGIES
The Investor Destinations Funds strive to provide shareholders with a high level of diversification across major asset classes primarily through both professionally designed, risk-based allocation models and professionally selected investments in the Underlying Funds.
First, the Adviser determines each Fund's target asset class allocations. The Adviser bases this decision on each Fund's target risk level, the expected return potential of each asset class, the anticipated risks or volatility of each asset class and similarities or differences in the typical investment cycle of the various asset classes. The Adviser has engaged Ibbotson Associates Advisors LLC, a registered investment adviser and wholly-owned subsidiary of Morningstar, Inc. that provides asset allocation consulting services, to develop recommended target allocations to the asset classes within each Fund. However, the Adviser ultimately has sole responsibility for determining each Fund's target allocation range, asset class allocations and its investments in Underlying Funds.
Second, once the asset allocation is determined, the Adviser selects the Underlying Funds. In general, a Fund may not invest in all Underlying Funds identified in the Appendix, but instead may select a limited number of Underlying Funds considered most appropriate for each Fund's investment objective and target risk level. In selecting Underlying Funds, the Adviser considers a variety of factors in the context of current economic and market conditions, including the Underlying Fund's investment strategy, risk profile and historical performance.
The potential rewards and risks associated with each Fund depend on both the asset class allocations and the chosen mix of Underlying Funds. The Adviser periodically reviews target allocation ranges, asset class allocations and continually monitors the mix of Underlying Funds, and will make changes either to the target allocation ranges, asset class allocations, the mix of Underlying Funds, or the Underlying Funds themselves in order to meet the investment objective. There can be no guarantee that any of the Funds will meet its respective objective.
Most of the Underlying Funds follow passive investment strategies. Their portfolio managers do not buy or sell securities based on analysis of economic, market or individual security analysis. Instead, the portfolio managers of the Underlying Funds seek to assemble portfolios of securities expected to approximately match the performance of specifically designated indexes. The portfolio managers generally make changes to Underlying Fund portfolio holdings only as needed to maintain alignment with the respective index. A potential benefit of passively managed index funds is relatively low shareholder expenses, which can enhance their total returns.
A description of the Underlying Funds and the types of securities in which they invest can be found in the Appendix.
TEMPORARY INVESTMENTS
Each of the Funds intends to be fully invested in accordance with its investment objective and strategies under normal circumstances. However, pending investment of cash balances or anticipated redemption activity, or if the Adviser believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market equivalents, including: (1) short-term U.S. government securities; (2) certificates of deposit, bankers' acceptances and interest-bearing savings deposits of commercial banks; (3) prime quality commercial paper; (4) repurchase agreements covering any of the securities in which a Fund may invest directly; and (5) subject to regulatory limits, shares of other investment companies that invest in securities in which a Fund may invest. Should this occur, a Fund will not be pursuing its investment objective and may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Investor Destinations Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
14 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Fund's respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
The Adviser determines the target allocation ranges and asset allocation for each Fund, selects the appropriate mix of Underlying Funds, monitors the performance and positioning of the Underlying Funds, and also selects and monitors any non-affiliated mutual funds held by the Funds. For these services, each Investor Destinations Fund pays the Adviser an annual management fee based on each Investor Destinations Fund's average daily net assets. This is in addition to the indirect investment management fees that the Funds pay as shareholders of affiliated Underlying Funds that the Adviser also manages. The Adviser and the Board of Trustees concur that the fees paid to the Adviser are for services in addition to the services provided by the Underlying Funds and do not duplicate those services.
The total aggregate management fee paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of each Fund's average daily net assets and taking into account any applicable waivers, was 0.13%.
The total annual advisory fees that can be paid to the Adviser (as a percentage of each Fund's average daily net assets) are 0.13% for each Fund.
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreement for the Funds will be available in the Funds' semi-annual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
GARTMORE CORE ASSET ALLOCATION SERIES | 15
SECTION 3 FUND MANAGEMENT (CONT.)
PORTFOLIO MANAGEMENT
William H. Miller, Senior Portfolio Manager, is the portfolio manager of the Funds and is responsible for the day-to-day management of the allocation of each Fund's assets among the asset classes and Underlying Funds. Mr. Miller joined the Adviser in July 1999. He is also the portfolio manager of the Gartmore Optimal Allocations Funds and the Gartmore GVIT Investor Destinations Funds, which are other asset allocation funds offered by the Adviser. Mr. Miller was the co-portfolio Manager of the Gartmore Nationwide Fund and the Gartmore GVIT Nationwide Fund from September 2000 until April 2006. Prior to joining the Adviser, Mr. Miller was a Senior Portfolio Manager at Putnam Investments from 1997 to 1999 and Vice President and Assistant Portfolio Manager at Delaware Management Company from 1995 to 1997.
The SAI provides additional information about the portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are managed directly by the Adviser, but if a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows these Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
16 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class R, Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Service Class shares and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES
Front-end sales charge A front-end sales charge means that a portion of your
up to 5.75% initial investment goes toward the sales charge and
is not invested.
Contingent deferred Reduction and waivers of sales charges may be
sales charge (CDSC)(1) available.
Annual service and/or Total annual operating expenses are lower than Class B
12b-1 fee of 0.25% and Class C expenses, which means higher dividends
Administrative services and/or net asset value ("NAV") per share.
fee up to 0.25%
No conversion feature.
No maximum investment amount.
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CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines 1% in most years to zero after six
years.
Annual service and/or Total annual operating expenses are higher than Class
12b-1 fee of 1.00% A expenses, which means lower dividends and/or NAV
No administrative per share.
services fee
Automatic conversion to Class A shares after seven
years, which means lower annual expenses in the
future.
Maximum investment amount of $100,000. Larger
investments may be rejected.
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CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are higher than Class
12b-1 fee of 1.00% A expenses, which means lower dividends and/or NAV
No administrative per share.
services fee
No conversion feature.
Maximum investment amount of $1,000,000(2). Larger
investments may be rejected.
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1 Unless you are eligible to purchase Class A shares without a sales charge, a CDSC of up to 0.15% may be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
GARTMORE CORE ASSET ALLOCATION SERIES | 17
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
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SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
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Less than $50,000 5.75% 6.10% 5.00%
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$50,000 to $99,999 4.75 4.99 4.00
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$100,000 to $249,999 3.50 3.63 3.00
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$250,000 to $499,999 2.50 2.56 2.00
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$500,000 to $999,999 2.00 2.04 1.75
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$1 million or more None None None*
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* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
18 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the Funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 0.15% applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason;
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN SALES OF CLASS A SHARES
--------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE --------------------------------------------------------------- If sold within 18 months 18 months 18 months --------------------------------------------------------------- Amount of CDSC 0.15% 0.10% 0.05% --------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund(s) is described above; however, the CDSCs for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
GARTMORE CORE ASSET ALLOCATION SERIES | 19
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
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7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
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Sales charge 5% 4% 3% 3% 2% 1% 0%
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CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The Funds offer Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
o the appropriate level and type of fee to compensate the intermediary. An intermediary may receive different compensation depending on which class is chosen.
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial services firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
20 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
SERVICE CLASS SHARES
Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Fund(s) for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Fund(s) for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o retirement plans for which no third-party administrator receives compensation from the Fund(s);
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C, Class R and Service Class shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Institutional Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C, Class R and Service Class shares pay the Distributor annual amounts not exceeding the following:
CLASS AS A % OF DAILY NET ASSETS
---------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
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Class B shares 1.00% (0.25% service fee)
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Class C shares 1.00% (0.25% service fee)
---------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
---------------------------------------------------------------------
Service Class shares 0.25% (distribution or service fee)
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ADMINISTRATIVE SERVICES FEES
Class A, Class R and Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by these Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A, Class R and Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class R and Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share classes over time and may cost you more than paying other types of fees.
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
GARTMORE CORE ASSET ALLOCATION SERIES | 21
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
22 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' transfer agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE.
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON
THE OFFERING OF SHARES AT ANY TIME. 60-DAY WRITTEN NOTICE TO SHAREHOLDERS.
** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
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THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, exchange intermediaries who are authorized to accept purchase, exchange
and redemption orders for the Funds. Your transaction is and redemption orders for the Funds. Your transaction is
processed at the NAV next calculated after the Funds' agent or processed at the NAV next calculated after the Funds' agent or
an authorized intermediary receives your order in proper form. an authorized intermediary receives your order in proper form.
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BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. mailing or faxing a letter to Gartmore Funds. The letter must
dollars and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT include your account number(s) and the name(s) of the Fund(s)
CASH, STARTER CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, you wish to exchange from and to. The letter must be signed by
CREDIT CARD CHECKS OR MONEY ORDERS. all account owners. We reserve the right to request original
documents for any faxed requests.
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BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The Funds unless you decline this option on your application. The Funds
follow procedures to confirm that telephone instructions are follow procedures to confirm that telephone instructions are
genuine and will not be liable for any loss, injury, damage or genuine and will not be liable for any loss, injury, damage or
expense that results from executing such instructions. The expense that results from executing such instructions. The
Funds may revoke telephone privileges at any time, without Funds may revoke telephone privileges at any time, without
notice to shareholders. notice to shareholders. For redemptions, shareholders who own
shares in an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed to the
address of record.
The Funds may record telephone instructions to redeem shares
and may request redemption instructions in writing, signed by
all shareholders on the account.
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ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line website. However, the Funds may discontinue on-line
transactions of Fund shares at any time. transactions of Fund shares at any time.
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BY BANK WIRE. You may have your bank transmit funds by federal BY BANK WIRE. The Funds can wire the proceeds of your
funds wire to the Funds' custodian bank. (The authorization redemption directly to your account at a commercial bank. A
will be in effect unless you give the Funds written notice of voided check must be attached to your application. (The
its termination.) authorization will be in effect unless you give the Funds
written notice of its termination.)
o if you choose this method to open a new account, you
must call our toll-free number before you wire your o your proceeds typically will be wired to your bank on
investment and arrange to fax your completed the next business day after your order has been
application. processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the
redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in order to
receive the current day's NAV. o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher
fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund your Gartmore BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds
Funds' account with proceeds from your bank via ACH on the can be sent to your bank via ACH on the second business day
second business day after your purchase order has been after your order has been processed. A voided check must be
processed. A voided check must be attached to your attached to your application. Money sent through ACH should
application. Money sent through ACH typically reaches Gartmore reach your bank in two business days. There is no fee for this
Funds from your bank in two business days. There is no fee for service. (The authorization will be in effect unless you give
this service. (The authorization will be in effect unless you the Funds written notice of its termination.)
give the Funds written notice of its termination.)
ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans or plan administrator regarding transactions. Retirement plans or
their administrators wishing to conduct transactions should their administrators wishing to conduct transactions should
call our toll-free number. Eligible entities or individuals call our toll-free number. Eligible entities or individuals
wishing to conduct transactions in Service Class or wishing to conduct transactions in Service Class or
Institutional Class shares should call our toll-free number. Institutional Class shares should call our toll-free number.
|
GARTMORE CORE ASSET ALLOCATION SERIES | 23
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
The Funds' NAVs are calculated based upon the net asset values of the Underlying Funds in which the Funds invest. The prospectuses for these Underlying Funds explain the circumstances under which those Underlying Funds will use fair value pricing and the effect of using fair value pricing.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
The Funds do not calculate NAV on days when the New York Stock Exchange is closed.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
24 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS B AND CLASS C SHARES
To open an account $2,000 (per Fund) To open an IRA account $1,000 (per Fund) Additional investments $100 (per Fund) To start an Automatic Asset Accumulation Plan $1,000 (per Fund) Additional investments (Automatic Asset Accumulation Plan) $50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- SERVICE CLASS SHARES To open an account $50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
GARTMORE CORE ASSET ALLOCATION SERIES | 25
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund).
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell or, in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or the Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
26 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or redemptions and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading, as may be the Underlying Funds that invest in such foreign securities. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares-Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
GARTMORE CORE ASSET ALLOCATION SERIES | 27
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you sell or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. Redemption fees are not imposed on redemptions or exchanges from the Gartmore Investor Destinations Funds. However, other Gartmore Funds into which you may exchange do impose redemption fees as shown below. Please see the prospectus for the Fund into which you may wish to exchange for further information.
--------------------------------------------------------------------------------
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and
Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
28 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
GARTMORE CORE ASSET ALLOCATION SERIES | 29
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gains distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
30 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 6 GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $7.36 0.07 (1.00) (0.93)
Year Ended October 31, 2003 $6.36 0.08 1.45 1.53
Year Ended October 31, 2004 $7.81 0.10 0.80 0.90
Year Ended October 31, 2005 $8.61 0.19 0.87 1.06
Year Ended October 31, 2006 $9.48 0.15 1.53 1.68
-------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $7.31 0.02 (0.99) (0.97)
Year Ended October 31, 2003 $6.32 0.04 1.43 1.47
Year Ended October 31, 2004 $7.74 0.04 0.80 0.84
Year Ended October 31, 2005 $8.53 0.11 0.86 0.97
Year Ended October 31, 2006 $9.38 0.08 1.52 1.60
-------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $7.36 - (1.04) (1.04)
Year Ended October 31, 2003 $6.32 0.05 1.42 1.47
Year Ended October 31, 2004 $7.73 0.04 0.80 0.84
Year Ended October 31, 2005 $8.52 0.12 0.86 0.98
Year Ended October 31, 2006 $9.37 0.07 1.52 1.59
-------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $7.45 - 0.29 0.29
Year Ended October 31, 2004 $7.74 0.07 0.82 0.89
Year Ended October 31, 2005 $8.56 0.18 0.86 1.04
Year Ended October 31, 2006 $9.42 0.16 1.49 1.65
-------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.07) - (0.07) $ 6.36 (12.67%)
Year Ended October 31, 2003 (0.08) - (0.08) $ 7.81 24.34%
Year Ended October 31, 2004 (0.10) - (0.10) $ 8.61 11.55%
Year Ended October 31, 2005 (0.19) - (0.19) $ 9.48 12.36%
Year Ended October 31, 2006 (0.20) (0.19) (0.39) $10.77 18.13%
------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.02) - (0.02) $ 6.32 (13.30%)
Year Ended October 31, 2003 (0.05) - (0.05) $ 7.74 23.42%
Year Ended October 31, 2004 (0.05) - (0.05) $ 8.53 10.86%
Year Ended October 31, 2005 (0.12) - (0.12) $ 9.38 11.46%
Year Ended October 31, 2006 (0.13) (0.19) (0.32) $10.66 17.39%
------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 - - - $ 6.32 (13.30%)
Year Ended October 31, 2003 (0.06) - (0.06) $ 7.73 23.41%
Year Ended October 31, 2004 (0.05) - (0.05) $ 8.52 10.88%
Year Ended October 31, 2005 (0.13) - (0.13) $ 9.37 11.49%
Year Ended October 31, 2006 (0.13) (0.19) (0.32) $10.64 17.29%
------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) - - - $ 7.74 3.89%(f)
Year Ended October 31, 2004 (0.07) - (0.07) $ 8.56 11.58%
Year Ended October 31, 2005 (0.18) - (0.18) $ 9.42 12.19%
Year Ended October 31, 2006 (0.19) (0.19) (0.38) $10.69 17.93%
------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 247 0.50% 1.42% 0.50% 1.42% 26.33%
Year Ended October 31, 2003 $ 3,742 0.52% 1.04% (h) (h) 44.11%
Year Ended October 31, 2004 $ 19,737 0.47% 1.06% (h) (h) 2.12%
Year Ended October 31, 2005 $ 38,583 0.49% 1.87% (h) (h) 6.51%
Year Ended October 31, 2006 $ 61,217 0.45% 1.27% 0.46% 1.27% 4.80%
-------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 48 1.24% 0.04% 1.27% 0.01% 26.33%
Year Ended October 31, 2003 $ 1,557 1.25% 0.16% (h) (h) 44.11%
Year Ended October 31, 2004 $ 7,414 1.20% 0.35% (h) (h) 2.12%
Year Ended October 31, 2005 $ 11,761 1.21% 1.18% (h) (h) 6.51%
Year Ended October 31, 2006 $ 16,890 1.19% 0.64% 1.19% 0.64% 4.80%
-------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 48 1.24% (0.96%) 1.48% (1.20%) 26.33%
Year Ended October 31, 2003 $ 7,706 1.26% 0.22% (h) (h) 44.11%
Year Ended October 31, 2004 $ 43,668 1.20% 0.32% (h) (h) 2.12%
Year Ended October 31, 2005 $ 71,231 1.21% 1.16% (h) (h) 6.51%
Year Ended October 31, 2006 $ 93,557 1.19% 0.65% 1.19% 0.64% 4.80%
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CLASS R SHARES
Period Ended October 31, 2003 (d) $ 1 0.82%(g) (0.46%)(g) 0.92%(g) (0.56%)(g) 44.11%
Year Ended October 31, 2004 $ 38 0.63% 0.93% (h) (h) 2.12%
Year Ended October 31, 2005 $ 216 0.63% 1.47% (h) (h) 6.51%
Year Ended October 31, 2006 $ 2,083 0.79% 0.88% 0.80% 0.88% 4.80%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from December 29, 2004 (commencement of operations) through October 31, 2005.
(f) Not annualized.
(g) Annualized.
(h) There were no fee reductions in this period.
GARTMORE CORE ASSET ALLOCATION SERIES | 31
SECTION 6 GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND FINANCIAL HIGHLIGHTS
(CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) $ 9.31 0.09 0.25 0.34
Year Ended October 31, 2006 $ 9.53 0.22 1.50 1.72
--------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 7.36 0.07 (0.99) (0.92)
Year Ended October 31, 2003 $ 6.37 0.07 1.45 1.52
Year Ended October 31, 2004 $ 7.82 0.09 0.81 0.90
Year Ended October 31, 2005 $ 8.63 0.18 0.87 1.05
Year Ended October 31, 2006 $ 9.50 0.14 1.54 1.68
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) (0.12) - (0.12) $ 9.53 3.66%(f)
Year Ended October 31, 2006 (0.22) (0.19) (0.41) $10.84 18.54%
---------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (0.07) - (0.07) $ 6.37 (12.64%)
Year Ended October 31, 2003 (0.07) - (0.07) $ 7.82 24.08%
Year Ended October 31, 2004 (0.09) - (0.09) $ 8.63 11.50%
Year Ended October 31, 2005 (0.18) - (0.18) $ 9.50 12.18%
Year Ended October 31, 2006 (0.19) (0.19) (0.38) $10.80 18.04%
---------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
RATIO
OF NET
INVESTMENT
INCOME
RATIO RATIO OF (LOSS)
OF NET EXPENSES (PRIOR TO
INVESTMENT (PRIOR TO REIMBURSE-
NET ASSETS RATIO OF INCOME REIMBURSE- MENTS) TO
AT END OF EXPENSES (LOSS) TO MENTS) TO AVERAGE
PERIOD TO AVERAGE AVERAGE AVERAGE NET NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) $ 1 0.24%(g) 1.39%(g) (h) (h) 6.51%
Year Ended October 31, 2006 $ 1,439 0.18% 1.74% 0.19% 1.73% 4.80%
----------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 54,923 0.61% 0.91% 0.67% 0.85% 26.33%
Year Ended October 31, 2003 $129,717 0.61% 0.98% 0.63% 0.96% 44.11%
Year Ended October 31, 2004 $282,486 0.59% 0.94% 0.60% 0.94% 2.12%
Year Ended October 31, 2005 $439,966 0.62% 1.78% (h) (h) 6.51%
Year Ended October 31, 2006 $676,249 0.59% 1.16% 0.60% 1.15% 4.80%
----------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from December 29, 2004 (commencement of operations) through October 31, 2005.
(f) Not annualized.
(g) Annualized.
(h) There were no fee reductions in this period.
32 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 6 GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 7.92 0.10 (0.87) (0.77)
Year Ended October 31, 2003 $ 7.04 0.11 1.31 1.42
Year Ended October 31, 2004 $ 8.35 0.12 0.75 0.87
Year Ended October 31, 2005 $ 9.10 0.21 0.74 0.95
Year Ended October 31, 2006 $ 9.84 0.18 1.33 1.51
--------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 7.88 0.06 (0.88) (0.82)
Year Ended October 31, 2003 $ 6.99 0.07 1.28 1.35
Year Ended October 31, 2004 $ 8.26 0.07 0.73 0.80
Year Ended October 31, 2005 $ 8.99 0.14 0.73 0.87
Year Ended October 31, 2006 $ 9.72 0.11 1.30 1.41
--------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 7.91 - (0.91) (0.91)
Year Ended October 31, 2003 $ 7.00 0.08 1.28 1.36
Year Ended October 31, 2004 $ 8.27 0.07 0.72 0.79
Year Ended October 31, 2005 $ 8.99 0.14 0.73 0.87
Year Ended October 31, 2006 $ 9.72 0.11 1.31 1.42
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 8.01 - 0.25 0.25
Year Ended October 31, 2004 $ 8.26 0.10 0.75 0.85
Year Ended October 31, 2005 $ 9.01 0.20 0.74 0.94
Year Ended October 31, 2006 $ 9.75 0.20 1.27 1.47
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) $ 9.67 0.12 0.20 0.32
Year Ended October 31, 2006 $ 9.85 0.25 1.27 1.52
--------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 7.91 0.11 (0.88) (0.77)
Year Ended October 31, 2003 $ 7.03 0.10 1.31 1.41
Year Ended October 31, 2004 $ 8.34 0.11 0.74 0.85
Year Ended October 31, 2005 $ 9.08 0.20 0.75 0.95
Year Ended October 31, 2006 $ 9.83 0.17 1.32 1.49
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.11) - (0.11) $ 7.04 (9.78%)
Year Ended October 31, 2003 (0.11) - (0.11) $ 8.35 20.42%
Year Ended October 31, 2004 (0.12) - (0.12) $ 9.10 10.48%
Year Ended October 31, 2005 (0.21) -(i) (0.21) $ 9.84 10.47%
Year Ended October 31, 2006 (0.22) (0.13) (0.35) $ 11.00 15.66%
---------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.07) - (0.07) $ 6.99 (10.46%)
Year Ended October 31, 2003 (0.08) - (0.08) $ 8.26 19.43%
Year Ended October 31, 2004 (0.07) - (0.07) $ 8.99 9.66%
Year Ended October 31, 2005 (0.14) -(i) (0.14) $ 9.72 9.74%
Year Ended October 31, 2006 (0.15) (0.13) (0.28) $ 10.85 14.83%
---------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 - - - $ 7.00 (10.33%)
Year Ended October 31, 2003 (0.09) - (0.09) $ 8.27 19.64%
Year Ended October 31, 2004 (0.07) - (0.07) $ 8.99 9.58%
Year Ended October 31, 2005 (0.14) -(i) (0.14) $ 9.72 9.74%
Year Ended October 31, 2006 (0.15) (0.13) (0.28) $ 10.86 14.83%
---------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) - - - $ 8.26 3.12%(f)
Year Ended October 31, 2004 (0.10) - (0.10) $ 9.01 10.27%
Year Ended October 31, 2005 (0.20) -(i) (0.20) $ 9.75 10.49%
Year Ended October 31, 2006 (0.22) (0.13) (0.35) $ 10.87 15.43%
---------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) (0.14) - (0.14) $ 9.85 3.37%(f)
Year Ended October 31, 2006 (0.25) (0.13) (0.38) $ 10.99 15.84%
---------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (0.11) - (0.11) $ 7.03 (9.88%)
Year Ended October 31, 2003 (0.10) - (0.10) $ 8.34 20.26%
Year Ended October 31, 2004 (0.11) - (0.11) $ 9.08 10.22%
Year Ended October 31, 2005 (0.20) -(i) (0.20) $ 9.83 10.48%
Year Ended October 31, 2006 (0.21) (0.13) (0.34) $ 10.98 15.53%
---------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,072 0.49% 1.69% 0.49% 1.69% 28.41%
Year Ended October 31, 2003 $ 9,729 0.48% 1.42% (h) (h) 8.08%
Year Ended October 31, 2004 $ 35,416 0.47% 1.37% 0.47% 1.37% 2.74%
Year Ended October 31, 2005 $ 57,073 0.49% 2.10% (h) (h) 5.51%
Year Ended October 31, 2006 $ 83,365 0.46% 1.65% 0.47% 1.64% 6.67%
-------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 130 1.25% 1.39% 1.26% 1.38% 28.41%
Year Ended October 31, 2003 $ 5,740 1.22% 0.63% (h) (h) 8.08%
Year Ended October 31, 2004 $ 19,546 1.19% 0.67% 1.19% 0.67% 2.74%
Year Ended October 31, 2005 $ 30,177 1.21% 1.40% (h) (h) 5.51%
Year Ended October 31, 2006 $ 39,399 1.19% 1.03% 1.20% 1.02% 6.67%
-------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 15 1.25% (0.21%) 3.34% (2.30%) 28.41%
Year Ended October 31, 2003 $ 17,804 1.22% 0.64% (h) (h) 8.08%
Year Ended October 31, 2004 $ 99,211 1.19% 0.66% 1.19% 0.66% 2.74%
Year Ended October 31, 2005 $ 155,315 1.21% 1.39% (h) (h) 5.51%
Year Ended October 31, 2006 $ 192,830 1.19% 1.03% 1.20% 1.02% 6.67%
-------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 1 0.75%(g) (0.04%)(g) 0.85%(g) (0.14%)(g) 8.08%
Year Ended October 31, 2004 $ 63 0.62% 1.19% (h) (h) 2.74%
Year Ended October 31, 2005 $ 253 0.61% 1.92% (h) (h) 5.51%
Year Ended October 31, 2006 $ 2,847 0.80% 1.73% 0.80% 1.72% 6.67%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) $ 1 0.24%(g) 1.73%(g) (h) (h) 5.51%
Year Ended October 31, 2006 $ 3,864 0.19% 2.07% 0.20% 2.06% 6.67%
-------------------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 90,512 0.61% 1.46% 0.65% 1.42% 28.41%
Year Ended October 31, 2003 $ 214,101 0.61% 1.36% (h) (h) 8.08%
Year Ended October 31, 2004 $ 452,237 0.59% 1.26% 0.59% 1.26% 2.74%
Year Ended October 31, 2005 $ 736,304 0.61% 1.98% (h) (h) 5.51%
Year Ended October 31, 2006 $1,077,126 0.59% 1.54% 0.60% 1.54% 6.67%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from December 29, 2004 (commencement of operations) through October 31, 2005.
(f) Not annualized.
(g) Annualized.
(h) There were no fee reductions in this period.
(i) The amount is less than $0.005.
GARTMORE CORE ASSET ALLOCATION SERIES | 33
SECTION 6 GARTMORE INVESTOR DESTINATIONS MODERATE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 8.64 0.17 (0.69) (0.52)
Year Ended October 31, 2003 $ 7.94 0.15 1.08 1.23
Year Ended October 31, 2004 $ 9.01 0.17 0.58 0.75
Year Ended October 31, 2005 $ 9.60 0.23 0.52 0.75
Year Ended October 31, 2006 $ 10.11 0.23 1.00 1.23
--------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 8.64 0.11 (0.71) (0.60)
Year Ended October 31, 2003 $ 7.92 0.11 1.06 1.17
Year Ended October 31, 2004 $ 8.96 0.10 0.59 0.69
Year Ended October 31, 2005 $ 9.55 0.16 0.50 0.66
Year Ended October 31, 2006 $ 10.04 0.15 0.99 1.14
--------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 8.66 0.04 (0.75) (0.71)
Year Ended October 31, 2003 $ 7.90 0.11 1.06 1.17
Year Ended October 31, 2004 $ 8.94 0.10 0.58 0.68
Year Ended October 31, 2005 $ 9.52 0.16 0.50 0.66
Year Ended October 31, 2006 $ 10.01 0.16 0.99 1.15
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 8.77 0.01 0.18 0.19
Year Ended October 31, 2004 $ 8.96 0.13 0.60 0.73
Year Ended October 31, 2005 $ 9.56 0.22 0.51 0.73
Year Ended October 31, 2006 $ 10.06 0.22 0.97 1.19
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) $ 10.02 0.18 0.09 0.27
Year Ended October 31, 2006 $ 10.12 0.27 0.99 1.26
--------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 8.63 0.17 (0.71) (0.54)
Year Ended October 31, 2003 $ 7.92 0.15 1.07 1.22
Year Ended October 31, 2004 $ 8.99 0.16 0.59 0.75
Year Ended October 31, 2005 $ 9.59 0.22 0.51 0.73
Year Ended October 31, 2006 $ 10.09 0.22 1.00 1.22
--------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
-------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
-------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.18) - (0.18) $ 7.94 (6.12%)
Year Ended October 31, 2003 (0.16) - (0.16) $ 9.01 15.75%
Year Ended October 31, 2004 (0.16) - (0.16) $ 9.60 8.36%
Year Ended October 31, 2005 (0.23) (0.01) (0.24) $ 10.11 7.86%
Year Ended October 31, 2006 (0.26) (0.11) (0.37) $ 10.97 12.41%
-------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.12) - (0.12) $ 7.92 (6.96%)
Year Ended October 31, 2003 (0.13) - (0.13) $ 8.96 14.89%
Year Ended October 31, 2004 (0.10) - (0.10) $ 9.55 7.72%
Year Ended October 31, 2005 (0.16) (0.01) (0.17) $ 10.04 6.96%
Year Ended October 31, 2006 (0.18) (0.11) (0.29) $ 10.89 11.61%
-------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (0.05) - (0.05) $ 7.90 (7.13%)
Year Ended October 31, 2003 (0.13) - (0.13) $ 8.94 14.98%
Year Ended October 31, 2004 (0.10) - (0.10) $ 9.52 7.67%
Year Ended October 31, 2005 (0.16) (0.01) (0.17) $ 10.01 6.98%
Year Ended October 31, 2006 (0.19) (0.11) (0.30) $ 10.86 11.65%
-------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) - - - $ 8.96 2.17%(f)
Year Ended October 31, 2004 (0.13) - (0.13) $ 9.56 8.19%
Year Ended October 31, 2005 (0.22) (0.01) (0.23) $ 10.06 7.68%
Year Ended October 31, 2006 (0.25) (0.11) (0.36) $ 10.89 12.11%
-------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) (0.17) - (0.17) $ 10.12 2.71%(f)
Year Ended October 31, 2006 (0.29) (0.11) (0.40) $ 10.98 12.69%
-------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (0.17) - (0.17) $ 7.92 (6.35%)
Year Ended October 31, 2003 (0.15) - (0.15) $ 8.99 15.59%
Year Ended October 31, 2004 (0.15) - (0.15) $ 9.59 8.34%
Year Ended October 31, 2005 (0.22) (0.01) (0.23) $ 10.09 7.66%
Year Ended October 31, 2006 (0.25) (0.11) (0.36) $ 10.95 12.30%
-------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,186 0.48% 2.37% 0.48% 2.37% 34.36%
Year Ended October 31, 2003 $ 9,972 0.47% 1.88% (h) (h) 13.50%
Year Ended October 31, 2004 $ 35,157 0.47% 1.78% 0.47% 1.78% 5.64%
Year Ended October 31, 2005 $ 57,505 0.48% 2.35% (h) (h) 5.91%
Year Ended October 31, 2006 $ 68,922 0.46% 2.16% 0.46% 2.15% 8.40%
----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 161 1.23% 1.33% 1.24% 1.32% 34.36%
Year Ended October 31, 2003 $ 6,229 1.21% 1.09% (h) (h) 13.50%
Year Ended October 31, 2004 $ 19,504 1.19% 1.07% 1.19% 1.07% 5.64%
Year Ended October 31, 2005 $ 28,907 1.20% 1.66% (h) (h) 5.91%
Year Ended October 31, 2006 $ 35,437 1.18% 1.51% 1.19% 1.50% 8.40%
----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 416 1.23% 1.89% 1.29% 1.83% 34.36%
Year Ended October 31, 2003 $ 21,995 1.22% 0.98% (h) (h) 13.50%
Year Ended October 31, 2004 $ 102,058 1.19% 1.07% 1.19% 1.07% 5.64%
Year Ended October 31, 2005 $ 150,491 1.20% 1.66% (h) (h) 5.91%
Year Ended October 31, 2006 $ 184,788 1.18% 1.51% 1.19% 1.51% 8.40%
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 1 0.74%(g) 0.68%(g) 0.84%(g) 0.58%(g) 13.50%
Year Ended October 31, 2004 $ 42 0.62% 1.79% (h) (h) 5.64%
Year Ended October 31, 2005 $ 199 0.61% 2.09% (h) (h) 5.91%
Year Ended October 31, 2006 $ 4,026 0.79% 1.88% 0.79% 1.87% 8.40%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (e) $ 1 0.23%(g) 2.45%(g) (h) (h) 5.91%
Year Ended October 31, 2006 $ 3,119 0.21% 2.55% 0.21% 2.54% 8.40%
----------------------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 123,963 0.61% 2.13% 0.65% 2.09% 34.36%
Year Ended October 31, 2003 $ 247,424 0.60% 1.82% (h) (h) 13.50%
Year Ended October 31, 2004 $ 487,130 0.59% 1.66% 0.59% 1.66% 5.64%
Year Ended October 31, 2005 $ 934,203 0.60% 2.24% (h) (h) 5.91%
Year Ended October 31, 2006 $1,152,756 0.58% 2.05% 0.59% 2.04% 8.40%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from December 29, 2004 (commencement of operations) through October 31, 2005.
(f) Not annualized.
(g) Annualized.
(h) There were no fee reductions in this period.
34 | GARTMORE CORE ASSET ALLOCATION SERIES
SECTION 6 GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
----------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
----------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
----------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (d) $ 9.19 0.26 (0.49) (0.23)
Year Ended October 31, 2003 $ 8.71 0.20 0.75 0.95
Year Ended October 31, 2004 $ 9.44 0.19 0.44 0.63
Year Ended October 31, 2005 $ 9.88 0.26 0.31 0.57
Year Ended October 31, 2006 $ 10.18 0.28 0.64 0.92
----------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (d) $ 9.20 0.20 (0.49) (0.29)
Year Ended October 31, 2003 $ 8.72 0.14 0.75 0.89
Year Ended October 31, 2004 $ 9.44 0.13 0.43 0.56
Year Ended October 31, 2005 $ 9.88 0.20 0.31 0.51
Year Ended October 31, 2006 $ 10.18 0.20 0.65 0.85
----------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 9.22 - (0.44) (0.44)
Year Ended October 31, 2003 $ 8.72 0.15 0.73 0.88
Year Ended October 31, 2004 $ 9.42 0.13 0.43 0.56
Year Ended October 31, 2005 $ 9.85 0.18 0.31 0.49
Year Ended October 31, 2006 $ 10.14 0.20 0.66 0.86
----------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 9.33 0.01 0.11 0.12
Year Ended October 31, 2004 $ 9.45 0.20 0.42 0.62
Year Ended October 31, 2005 $ 9.91 0.25 0.31 0.56
Year Ended October 31, 2006 $ 10.22 0.28 0.65 0.93
----------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (f) $ 10.17 0.23 0.04 0.27
Year Ended October 31, 2006 $ 10.24 0.31 0.65 0.96
----------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (d) $ 9.20 0.26 (0.50) (0.24)
Year Ended October 31, 2003 $ 8.72 0.19 0.76 0.95
Year Ended October 31, 2004 $ 9.47 0.19 0.43 0.62
Year Ended October 31, 2005 $ 9.91 0.25 0.31 0.56
Year Ended October 31, 2006 $ 10.21 0.26 0.66 0.92
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (d) (0.25) - (0.25) $ 8.71 (2.60%)
Year Ended October 31, 2003 (0.22) - (0.22) $ 9.44 11.02%
Year Ended October 31, 2004 (0.19) - (0.19) $ 9.88 6.71%
Year Ended October 31, 2005 (0.26) (0.01) (0.27) $ 10.18 5.78%
Year Ended October 31, 2006 (0.29) (0.17) (0.46) $ 10.64 9.24%
--------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (d) (0.19) - (0.19) $ 8.72 (3.22%)
Year Ended October 31, 2003 (0.17) - (0.17) $ 9.44 10.37%
Year Ended October 31, 2004 (0.12) - (0.12) $ 9.88 5.99%
Year Ended October 31, 2005 (0.20) (0.01) (0.21) $ 10.18 5.08%
Year Ended October 31, 2006 (0.22) (0.17) (0.39) $ 10.64 8.49%
--------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (0.06) - (0.06) $ 8.72 (3.14%)
Year Ended October 31, 2003 (0.18) - (0.18) $ 9.42 10.26%
Year Ended October 31, 2004 (0.13) - (0.13) $ 9.85 5.99%
Year Ended October 31, 2005 (0.19) (0.01) (0.20) $ 10.14 5.01%
Year Ended October 31, 2006 (0.22) (0.17) (0.39) $ 10.61 8.50%
--------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) - - - $ 9.45 1.29%(g)
Year Ended October 31, 2004 (0.16) - (0.16) $ 9.91 6.55%
Year Ended October 31, 2005 (0.24) (0.01) (0.25) $ 10.22 5.73%
Year Ended October 31, 2006 (0.29) (0.17) (0.46) $ 10.69 9.19%
--------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (f) (0.20) - (0.20) $ 10.24 3.70%(g)
Year Ended October 31, 2006 (0.32) (0.17) (0.49) $ 10.71 9.58%
--------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (d) (0.24) - (0.24) $ 8.72 (2.70%)
Year Ended October 31, 2003 (0.20) - (0.20) $ 9.47 11.09%
Year Ended October 31, 2004 (0.18) - (0.18) $ 9.91 6.59%
Year Ended October 31, 2005 (0.25) (0.01) (0.26) $ 10.21 5.67%
Year Ended October 31, 2006 (0.28) (0.17) (0.45) $ 10.68 9.18%
--------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
---------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (d) $ 898 0.50% 2.99% 0.51% 2.98% 49.00%
Year Ended October 31, 2003 $ 4,482 0.53% 2.34% (i) (i) 19.93%
Year Ended October 31, 2004 $ 11,157 0.52% 2.12% 0.52% 2.12% 6.66%
Year Ended October 31, 2005 $ 16,923 0.54% 2.57% 0.54% 2.57% 8.37%
Year Ended October 31, 2006 $ 27,244 0.48% 2.65% 0.49% 2.65% 12.64%
---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (d) $ 83 1.27% 2.24% 1.29% 2.22% 49.00%
Year Ended October 31, 2003 $ 2,453 1.28% 1.52% (i) (i) 19.93%
Year Ended October 31, 2004 $ 4,606 1.21% 1.41% (i) (i) 6.66%
Year Ended October 31, 2005 $ 6,002 1.22% 1.90% 1.22% 1.90% 8.37%
Year Ended October 31, 2006 $ 7,376 1.20% 1.98% 1.21% 1.97% 12.64%
---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 88 1.27% 2.48% 1.33% 2.42% 49.00%
Year Ended October 31, 2003 $ 7,530 1.29% 1.45% (i) (i) 19.93%
Year Ended October 31, 2004 $ 26,760 1.22% 1.42% (i) (i) 6.66%
Year Ended October 31, 2005 $ 39,545 1.22% 1.90% 1.22% 1.90% 8.37%
Year Ended October 31, 2006 $ 41,108 1.20% 1.97% 1.21% 1.97% 12.64%
---------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 1 0.81%(h) 1.34%(h) 0.91%(h) 1.24(h) 19.93%
Year Ended October 31, 2004 $ 1 0.60% 2.01% (i) (i) 6.66%
Year Ended October 31, 2005 $ 1 0.65% 2.54% 0.65% 2.54% 8.37%
Year Ended October 31, 2006 $ 620 0.81% 2.53% 0.82% 2.52% 12.64%
---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (f) $ 1 0.29%(h) 3.17%(h) (i) (i) 8.37%
Year Ended October 31, 2006 $ 905 0.20% 3.05% 0.21% 3.04% 12.64%
---------------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (d) $ 36,927 0.61% 2.82% 0.69% 2.74% 49.00%
Year Ended October 31, 2003 $ 78,189 0.61% 2.28% 0.65% 2.24% 19.93%
Year Ended October 31, 2004 $ 136,368 0.61% 2.01% 0.61% 2.01% 6.66%
Year Ended October 31, 2005 $ 195,790 0.62% 2.49% 0.62% 2.49% 8.37%
Year Ended October 31, 2006 $ 241,726 0.60% 2.53% 0.61% 2.52% 12.64%
---------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) Net investment income (loss) is based on average shares outstanding during the period.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) For the period from December 29, 2004 (commencement of operations) through October 31, 2005.
(g) Not annualized.
(h) Annualized.
(i) There were no fee reductions in this period.
GARTMORE CORE ASSET ALLOCATION SERIES | 35
SECTION 6 GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9.78 0.28 (0.24) 0.04
Year Ended October 31, 2003 $ 9.51 0.26 0.39 0.65
Year Ended October 31, 2004 $ 9.88 0.22 0.25 0.47
Year Ended October 31, 2005 $ 10.13 0.24 0.12 0.36
Year Ended October 31, 2006 $ 10.17 0.34 0.32 0.66
-------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 9.79 0.24 (0.25) (0.01)
Year Ended October 31, 2003 $ 9.53 0.19 0.38 0.57
Year Ended October 31, 2004 $ 9.87 0.15 0.25 0.40
Year Ended October 31, 2005 $ 10.12 0.21 0.08 0.29
Year Ended October 31, 2006 $ 10.16 0.24 0.34 0.58
-------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 9.79 0.23 (0.25) (0.02)
Year Ended October 31, 2003 $ 9.51 0.20 0.37 0.57
Year Ended October 31, 2004 $ 9.85 0.16 0.24 0.40
Year Ended October 31, 2005 $ 10.09 0.21 0.08 0.29
Year Ended October 31, 2006 $ 10.13 0.25 0.34 0.59
-------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003(d) $ 9.83 0.02 0.02 0.04
Year Ended October 31, 2004 $ 9.87 0.22 0.24 0.46
Year Ended October 31, 2005 $ 10.15 0.22 0.14 0.36
Year Ended October 31, 2006 $ 10.20 0.26 0.38 0.64
-------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005(e) $ 10.20 0.27 (0.02) 0.25
Year Ended October 31, 2006 $ 10.23 0.33 0.37 0.70
-------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 9.79 0.31 (0.26) 0.05
Year Ended October 31, 2003 $ 9.53 0.26 0.38 0.64
Year Ended October 31, 2004 $ 9.90 0.23 0.23 0.46
Year Ended October 31, 2005 $ 10.15 0.27 0.09 0.36
Year Ended October 31, 2006 $ 10.20 0.31 0.34 0.65
-------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.31) - (0.31) $ 9.51 0.45%
Year Ended October 31, 2003 (0.28) - (0.28) $ 9.88 6.89%
Year Ended October 31, 2004 (0.22) - (0.22) $ 10.13 4.84%
Year Ended October 31, 2005 (0.27) (0.05) (0.32) $ 10.17 3.67%
Year Ended October 31, 2006 (0.31) (0.12) (0.43) $ 10.40 6.68%
------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.25) - (0.25) $ 9.53 (0.15%)
Year Ended October 31, 2003 (0.23) - (0.23) $ 9.87 6.05%
Year Ended October 31, 2004 (0.15) - (0.15) $ 10.12 4.12%
Year Ended October 31, 2005 (0.20) (0.05) (0.25) $ 10.16 3.02%
Year Ended October 31, 2006 (0.24) (0.12) (0.36) $ 10.38 5.89%
------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (0.26) - (0.26) $ 9.51 (0.21%)
Year Ended October 31, 2003 (0.23) - (0.23) $ 9.85 6.03%
Year Ended October 31, 2004 (0.16) - (0.16) $ 10.09 4.10%
Year Ended October 31, 2005 (0.20) (0.05) (0.25) $ 10.13 2.95%
Year Ended October 31, 2006 (0.25) (0.12) (0.37) $ 10.35 5.92%
------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003(d) - - - $ 9.87 0.41%(f)
Year Ended October 31, 2004 (0.18) - (0.18) $ 10.15 4.73%
Year Ended October 31, 2005 (0.26) (0.05) (0.31) $ 10.20 3.65%
Year Ended October 31, 2006 (0.32) (0.12) (0.44) $ 10.40 6.46%
------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005(e) (0.22) - (0.22) $ 10.23 2.44%(f)
Year Ended October 31, 2006 (0.35) (0.12) (0.47) $ 10.46 6.91%
------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (0.31) - (0.31) $ 9.53 0.48%
Year Ended October 31, 2003 (0.27) - (0.27) $ 9.90 6.76%
Year Ended October 31, 2004 (0.21) - (0.21) $ 10.15 4.69%
Year Ended October 31, 2005 (0.26) (0.05) (0.31) $ 10.20 3.62%
Year Ended October 31, 2006 (0.31) (0.12) (0.43) $ 10.42 6.52%
------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 802 0.50% 3.62% 0.50% 3.62% 46.89%
Year Ended October 31, 2003 $ 1,798 0.53% 2.83% (h) (h) 32.93%
Year Ended October 31, 2004 $ 5,008 0.50% 2.43% 0.51% 2.43% 11.67%
Year Ended October 31, 2005 $ 28,965 0.53% 2.85% 0.53% 2.85% 13.42%
Year Ended October 31, 2006 $ 18,384 0.48% 2.98% 0.48% 2.97% 36.51%
----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 75 1.27% 2.77% 1.33% 2.71% 46.89%
Year Ended October 31, 2003 $ 1,622 1.29% 1.96% (h) (h) 32.93%
Year Ended October 31, 2004 $ 3,437 1.23% 1.70% (h) (h) 11.67%
Year Ended October 31, 2005 $ 4,010 1.22% 2.10% 1.22% 2.10% 13.42%
Year Ended October 31, 2006 $ 3,841 1.21% 2.36% 1.22% 2.35% 36.51%
----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 400 1.27% 2.75% 1.29% 2.73% 46.89%
Year Ended October 31, 2003 $ 3,592 1.29% 1.95% (h) (h) 32.93%
Year Ended October 31, 2004 $ 13,683 1.24% 1.69% (h) (h) 11.67%
Year Ended October 31, 2005 $ 19,106 1.23% 2.10% 1.23% 2.10% 13.42%
Year Ended October 31, 2006 $ 18,474 1.21% 2.36% 1.22% 2.36% 36.51%
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003(d) $ 1 0.84%(g) 2.03%(g) 0.94%(g) 1.93%(g) 32.93%
Year Ended October 31, 2004 $ 1 0.62% 2.30% (h) (h) 11.67%
Year Ended October 31, 2005 $ 3 0.65% 2.67% 0.65% 2.67% 13.42%
Year Ended October 31, 2006 $ 503 0.83% 3.03% 0.83% 3.02% 36.51%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005(e) $ 1 0.28%(g) 3.74%(g) 0.28%(g) 3.74%(g) 13.42%
Year Ended October 31, 2006 $ 159 0.22% 3.68% 0.23% 3.68% 36.51%
----------------------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 28,253 0.61% 3.49% 0.72% 3.38% 46.89%
Year Ended October 31, 2003 $ 59,472 0.61% 2.73% 0.67% 2.68% 32.93%
Year Ended October 31, 2004 $ 101,261 0.61% 2.31% 0.63% 2.29% 11.67%
Year Ended October 31, 2005 $ 137,589 0.62% 2.70% 0.63% 2.70% 13.42%
Year Ended October 31, 2006 $ 167,499 0.61% 2.95% 0.62% 2.95% 36.51%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from December 29, 2004 (commencement of operations) through October 31, 2005.
(f) Not annualized.
(g) Annualized.
(h) There were no fee reductions in this period.
36 | GARTMORE CORE ASSET ALLOCATION SERIES
APPENDIX DESCRIPTION OF UNDERLYING INVESTMENTS
Following is a description of the Underlying Funds that are currently eligible for each asset class. The mix of Underlying Funds held by an individual Fund depends on its target allocation and the portfolio manager's assessment of current economic and market conditions. The following list of eligible Underlying Funds is subject to change at any time and without notice. Prospectuses for the Underlying Funds should be referred to for more information.
U.S. STOCKS - LARGE CAP
GARTMORE S&P 500 INDEX FUND seeks to approximately match the performance and yield of the S&P 500 Index, a market-weighted index of approximately 500 common stocks of large capitalization companies. The Fund employs a "passive" management approach and does not necessarily invest in all of the common stocks in the S&P 500, or in the same weightings; however, under normal conditions, the Fund invests at least 80% of its assets in a statistically selected sample of equity securities of companies included in the S&P 500 and in derivative instruments linked to the S&P 500. The Fund's portfolio consists of a statistically selected sample of stocks in the S&P 500 and in derivative instruments linked to the S&P 500, primarily exchange traded futures contracts. As a result, the Fund's average market capitalization, industry weightings and other fundamental characteristics are similar to the S&P 500 as a whole. The Fund may also engage in securities lending.
THE FUNDS MAY ALSO INVEST IN OTHER LARGE-CAP INDEX FUNDS THAT SEEK TO MATCH THE PERFORMANCE OF THE S&P 500 INDEX.
U.S. STOCKS - MID CAP
GARTMORE MID CAP MARKET INDEX FUND seeks to match the performance of the S&P Mid Cap 400 Index as closely as possible before the deduction of Fund expenses. The S&P Mid Cap 400 is a market-weighted index that includes approximately 400 common stocks issued by mid-size U.S. companies in a wide range of businesses. The Fund employs a "passive" management approach and, under normal circumstances, the Fund invests at least 80% of its net assets in a statistically selected sample of equity securities of companies included in the S&P 400 and in derivative instruments linked to the S&P 400, primarily exchange traded futures contracts. The Fund does not necessarily invest in all of the common stocks in the S&P 400, or in the same weightings as in the S&P 400; however, the Fund's average market capitalization, industry weightings and other fundamental characteristics are expected to be similar to the S&P Mid Cap 400 as a whole. The Fund may also engage in securities lending.
THE FUNDS MAY ALSO INVEST IN OTHER MID-CAP INDEX FUNDS THAT SEEK TO MATCH THE PERFORMANCE OF THE S&P MID CAP 400 INDEX.
U.S. STOCKS - SMALL CAP
GARTMORE SMALL CAP INDEX FUND seeks to match the performance of the Russell 2000 Index as closely as possible before the deduction of Fund expenses. The Russell 2000 is a market weighted index that includes approximately 2,000 common stocks issued by smaller U.S. companies in a wide range of businesses. The Fund employs a "passive" management approach and under normal circumstances, the Fund invests at least 80% of its net assets in a statistically selected sample of equity securities of companies included in the Russell 2000 and in derivative instruments linked to the Russell 2000, primarily exchange traded futures contracts. The Fund does not necessarily invest in all of the common stocks in the Russell 2000, or in the same weightings. However, the Fund's average market capitalization, industry weightings and other fundamental characteristics are similar to the Russell 2000 Index as a whole. The Fund may also engage in securities lending.
THE FUNDS MAY ALSO INVEST IN OTHER SMALL-CAP INDEX FUNDS THAT SEEK TO MATCH THE PERFORMANCE OF THE RUSSELL 2000 INDEX.
INTERNATIONAL STOCKS
GARTMORE INTERNATIONAL INDEX FUND seeks to match the performance of the Morgan Stanley Capital International Europe, Australasia and Far East Index (MSCI EAFE Index) as closely as possible before the deduction of Fund expenses. The MSCI EAFE Index includes equity securities of large capitalization companies from various industrial sectors whose primary trading markets are located outside the U.S. The Fund employs a "passive" management approach and under normal circumstances, the Fund invests at least 80% of the value of its net assets in a statistically selected sample of equity securities of companies included in the MSCI EAFE Index and in derivative instruments linked to the Index, primarily exchange traded futures contracts. The Fund may also use forward foreign exchange contracts. The Fund does not necessarily invest in all of the countries or all of the companies in the MSCI EAFE Index or in the same weightings; however, the Fund's market capitalization, industry weightings and other fundamental characteristics are expected to be similar to the MSCI EAFE Index as a whole. The Fund may also engage in securities lending.
THE FUNDS MAY ALSO INVEST IN OTHER INTERNATIONAL INDEX FUNDS THAT SEEK TO MATCH
THE PERFORMANCE OF THE MSCI EAFE INDEX.
GARTMORE CORE ASSET ALLOCATION SERIES | 37
APPENDIX DESCRIPTION OF UNDERLYING INVESTMENTS (CONT.)
BONDS
GARTMORE BOND INDEX FUND seeks to match the performance of the Lehman Brothers U.S. Aggregate Index ("Index") as closely as possible before the deduction of Fund expenses. The Index primarily includes different types of dollar-denominated investment grade bonds such as those issued by U.S. and foreign governments and their agencies and by U.S. or foreign companies. The Fund employs a "passive" management approach and invests in a statistically selected sample of bonds that are included in or correlated with the Index and in derivative instruments linked to the Index or securities within it. The Fund does not necessarily invest in all of the bonds in the Index or in the same weightings. The Fund may invest in bonds outside the Index if their characteristics such as maturity, duration or credit quality are similar to bonds within it. As a result, the Fund's exposure to interest rate, credit or prepayment risks may differ from that of the Index. The Fund may also engage in securities lending.
THE FUNDS MAY ALSO INVEST IN OTHER BOND INDEX FUNDS THAT SEEK TO MATCH THE PERFORMANCE OF THE INDEX.
SHORT-TERM BONDS
THE NATIONWIDE CONTRACT is a fixed interest contract issued and guaranteed by Nationwide Life Insurance Company (Nationwide). This contract has a stable principal value and pays a fixed rate of interest to each Fund that holds a contract. The fixed interest rate must be at least 3.50% per year, but may be higher. Nationwide calculates the interest rate in the same way it calculates guaranteed interest rates for similar contracts. The rate paid by the Nationwide Contract is guaranteed for a given period regardless of the current market conditions. The principal amount is also guaranteed. The Funds' portfolio management team believes the stable nature of the Nationwide Contract should reduce a Fund's volatility and overall risk, especially when stock and bond markets decline simultaneously However, under certain market conditions a Fund's investment in the Nationwide contract could hamper its performance.
GARTMORE SHORT DURATION BOND FUND seeks to provide a high level of current income while preserving capital and minimizing fluctuations in share value. Under normal circumstances, the Fund invests primarily in U.S. government securities, U.S. government agency securities and corporate bonds that are investment grade. The Fund also may purchase mortgage-backed securities and asset-backed securities, and may invest in fixed income securities that pay interest on either a fixed-rate or variable-rate basis. The Fund is managed so that its duration generally will not exceed three years, and the Fund may enter into certain derivatives contracts, such as futures or options, solely for the purpose of adjusting the Fund's duration in order to minimize fluctuation of the Fund's share value.
THE FUNDS MAY ALSO INVEST IN OTHER SHORT-TERM BOND FUNDS.
SHORT-TERM INVESTMENTS
GARTMORE ENHANCED INCOME FUND seeks to provide a high level of current income while preserving capital and minimizing the effect of market fluctuations on an investor's account value. Under normal market conditions, the Fund invests primarily in high-grade debt securities issued by the U.S. government and its agencies, as well as by corporations. The Fund also purchases mortgage-backed and asset-backed securities. The Fund is managed so that its duration will be between 6 months and one year, and will not exceed two years. The Fund may also enter into futures or options contracts solely for the purpose of adjusting the Fund's duration or to minimize fluctuation of the Fund's market value.
GARTMORE MONEY MARKET FUND seeks as high a level of current income as is consistent with the preservation of capital and maintenance of liquidity. The Fund invests in high quality money market obligations maturing in 397 days or less. All money market obligations must be denominated in U.S. dollars and be rated in one of the two highest short-term ratings categories by a nationally recognized statistical rating organization or, if unrated, be of comparable quality. The Fund may invest in floating- and variable-rate obligations and may enter into repurchase agreements. The Fund's dollar-weighted average maturity will be 90 days or less.
THE FUNDS MAY ALSO INVEST IN OTHER SHORT-TERM INVESTMENTS.
38 | GARTMORE CORE ASSET ALLOCATION SERIES
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INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents -- which may be obtained free of charge--contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. -
9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for
closing share prices. Also, visit the Gartmore Funds' website at
www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov,
o by electronic request to publicinfo@sec.gov.
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.), or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-CAA 2/07
Core Equity Series
Gartmore Small Cap Fund
Gartmore Small Cap Core Fund
Gartmore Small Cap Growth Opportunities Fund
Gartmore Small Cap Value Fund
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
CORE EQUITY Series
Broad market portfolios featuring growth, value and blend styles designed to form the foundation of an asset allocation program.
FUND AND CLASS TICKER ------------------------------------------------------------------------------------ Gartmore Small Cap Fund Class A GSXAX ------------------------------------------------------------------------------------ Gartmore Small Cap Fund Class B GSXBX ------------------------------------------------------------------------------------ Gartmore Small Cap Fund Class C GSXCX ------------------------------------------------------------------------------------ Gartmore Small Cap Fund Class R GNSRX ------------------------------------------------------------------------------------ Gartmore Small Cap Fund Institutional Class GSCIX ------------------------------------------------------------------------------------ Gartmore Small Cap Fund Institutional Service Class GSXIX ------------------------------------------------------------------------------------ Gartmore Small Cap Core Fund Class A GCRAX ------------------------------------------------------------------------------------ Gartmore Small Cap Core Fund Class B GCRBX ------------------------------------------------------------------------------------ Gartmore Small Cap Core Fund Class C GCRCX ------------------------------------------------------------------------------------ Gartmore Small Cap Core Fund Class R GCRRX ------------------------------------------------------------------------------------ Gartmore Small Cap Core Fund Institutional Class GCEIX ------------------------------------------------------------------------------------ Gartmore Small Cap Core Fund Institutional Service Class GCRSX ------------------------------------------------------------------------------------ Gartmore Small Cap Growth Opportunities Class A GCOAX ------------------------------------------------------------------------------------ Gartmore Small Cap Growth Opportunities Fund Class B GCOBX ------------------------------------------------------------------------------------ Gartmore Small Cap Growth Opportunities Fund Class C GWOCX ------------------------------------------------------------------------------------ Gartmore Small Cap Growth Opportunities Fund Class R GWORX ------------------------------------------------------------------------------------ Gartmore Small Cap Growth Opportunities Fund Institutional Class GWOIX ------------------------------------------------------------------------------------ Gartmore Small Cap Growth Opportunities Fund Institutional Service Class GWOSX ------------------------------------------------------------------------------------ Gartmore Small Cap Value Fund Class A GPVAX ------------------------------------------------------------------------------------ Gartmore Small Cap Value Fund Class B GPVBX ------------------------------------------------------------------------------------ Gartmore Small Cap Value Fund Class C GPVCX ------------------------------------------------------------------------------------ Gartmore Small Cap Value Fund Class R GPVRX ------------------------------------------------------------------------------------ Gartmore Small Cap Value Fund Institutional Class GPVIX ------------------------------------------------------------------------------------ Gartmore Small Cap Value Fund Institutional Service Class GPVSX ------------------------------------------------------------------------------------ |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES
AND PERFORMANCE
Gartmore Small Cap Fund
Gartmore Small Cap Core Fund
Gartmore Small Cap Growth
Opportunities Fund
Gartmore Small Cap Value Fund
19 SECTION 2: FUND DETAILS
Additional Information about Investments,
Investment Techniques and Risks
21 SECTION 3: FUND MANAGEMENT
Investment Adviser
Portfolio Management
Multi-Manager Structure
24 SECTION 4: INVESTING WITH
GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
36 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other
Tax-Deferred Accounts
Backup Withholding
38 SECTION 6: FINANCIAL HIGHLIGHTS
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GARTMORE CORE EQUITY SERIES | 1
CORE EQUITY Series
INTRODUCTION TO THE CORE EQUITY SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT FOUR FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
Gartmore Small Cap Fund
Gartmore Small Cap Core Fund
Gartmore Small Cap Growth Opportunities Fund
Gartmore Small Cap Value Fund
THESE FUNDS ARE PRIMARILY INTENDED:
o to help investors seek to grow their capital by pursuing equity investments in small-cap companies.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET ITS RESPECTIVE INVESTMENT OBJECTIVE OR THAT A FUND'S PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
Each Fund offers six different share classes - Class A, Class B, Class C, Class R, Institutional Service Class and Institutional Class. An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Although each Fund is currently managed by Gartmore Mutual Fund Capital Trust (the "Adviser"), each Fund may employ a "multimanager" structure, which means that the Adviser, as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE CORE EQUITY SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMON STOCK - securities representing shares of ownership of a corporation.
DERIVATIVE - a contract or investment whose value is based on the performance of an underlying financial asset, index or economic measure.
EQUITY SECURITIES - securities, including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts, that represent an ownership interest in the issuer.
GROWTH STYLE - a style of investing in equity securities of companies that the Fund's management believes have above- average rates of earnings growth and which therefore may experience above-average increases in stock price.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
QUANTITATIVE TECHNIQUES - mathematical and statistical methods used in the investment process to identify securities of issuers for possible purchase or sale by a Fund.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
VALUE STYLE - a style of investing in equity securities that the Fund's management believes are undervalued, which means that their prices are less than Fund management believes they are worth, based on such factors as price-to-book ratio, price-toearnings ratio and cash flow. Companies issuing such securities may be currently out of favor or experiencing poor operating conditions that Fund management believes to be temporary.
GARTMORE CORE EQUITY SERIES | 3
SECTION 1 GARTMORE SMALL CAP FUND SUMMARY AND PERFORMANCE
Given the recent growth of the Fund's assets, the Fund's investment adviser has determined that it can most effectively manage up to approximately $1.5 billion in assets in the Fund's small cap style. Therefore, as the Fund's assets approach $1.5 billion, the adviser intends to close the Fund to new investors. If this occurs, existing shareholders may continue to invest in the Fund both directly and through exchanges from other Gartmore Mutual Funds, as well as through dividend and capital gain reinvestments. The investment adviser also reserves the right to discontinue new purchases of Fund shares by existing shareholders at some future point (other than through dividend and capital gain reinvestments). If this occurs, existing shareholders will receive notice.
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by SMALL-CAP COMPANIES. The Fund also may invest in foreign securities and securities of larger companies. The Fund's management considers many factors in selecting securities for investment, including measures of earnings momentum, relative value, management action and price trend. The portfolio managers focus on securities that exhibit some or all of the following characteristics:
o attractive valuation and near-term strength of business (e.g., based on estimate revisions and earnings surprises);
o long-term growth prospects of the company and its industry;
o level of duress a company is experiencing;
o price-to-earnings ratio and price-to-free cash flow ratio that, in the team's opinion, reflect the best standards of value and
o quality of earnings.
The Fund's management considers selling a security when:
o a company's MARKET CAPITALIZATION exceeds the benchmark capitalization range;
o long-term growth prospects deteriorate;
o more compelling investment values are identified;
o near-term reported or pre-announced earnings are disappointing and recurring or
o the stock attains full valuation relative to stocks of similar companies or reaches the team's price target.
The Fund may invest without limit in initial public offerings ("IPOs") of small-cap companies, although such IPOs may not be available for investment by the Fund or the impact of any such IPO would be uncertain.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 2000 Index, or other funds with similar investment objectives and strategies.
SMALL-CAP RISK - results from investing in stocks of smaller companies. Smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
FOREIGN RISK - is the risk that foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
INITIAL PUBLIC OFFERING RISK - availability of IPOs may be limited and the Fund may not be able to buy any shares at the offering price, or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE SMALL CAP FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad- based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS -CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
BEST QUARTER: 23.36% -2ND QTR. OF 2003
WORST QUARTER: -21.93% -3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (NOV. 2, 1998)
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Class A shares - Before Taxes 21.76% 17.73% 14.37%
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Class A shares - After Taxes
on Distributions 20.14% 16.11% 12.89%
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Class A shares - After Taxes
on Distributions and Sales of Shares 14.28% 14.79% 11.94%
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Class B shares - Before Taxes 23.26% 18.18% 14.49%
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Class C shares - Before Taxes(2)(3) 27.21% 18.39% 14.50%
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Class R shares - Before Taxes(2) 28.86% 18.75% 14.70%
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Institutional Service Class shares -
Before Taxes 29.61% 19.40% 15.45%
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Institutional Class shares -
Before Taxes(4) 29.55% 19.42% 15.46%
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Russell 2000 Index(5) 18.37% 11.39% 10.79%
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1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns before the first offering of Class C shares (3/1/01) and Class R shares (12/30/03) are based on the previous performance of Class B shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class C and Class R shares would have produced because all three classes invest in the same portfolio of securities. Returns for these classes have been adjusted to eliminate sales charges that do not apply to these classes, but have not been adjusted to reflect lower class-level expenses, if any.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charges.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Class have not been adjusted to reflect its lower expenses.
5 The Russell 2000 Index is an unmanaged index that measures the performance of the stocks of small-capitalization U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an Index.
GARTMORE CORE EQUITY SERIES | 5
SECTION 1 GARTMORE SMALL CAP FUND SUMMARY AND PERFORMANCE (cont.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INSTITUTIONAL SERVICE INSTITUTIONAL INVESTMENT) (1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.89% 0.89% 0.89% 0.89% 0.89% 0.89% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 0.25% 0.19% 0.19% 0.39% 0.36% 0.19% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 1.39% 2.08% 2.08% 1.78% 1.25% 1.08% ------------------------------------------------------------------------------------------------------------------------------------ Acquired Fund (Indirect Annual Underlying Fund) Operating Expenses(8) 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND ANNUAL OPERATING EXPENSES 1.42% 2.11% 2.11% 1.81% 1.28% 1.11% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.50% will apply to
redemptions of Class A shares if purchased without sales charges and for
which a finders fee was paid. See Section 4, Investing with Gartmore Funds:
Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.06%, 0.20%, and 0.17%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Reflects the Fund's investment in shares of one or more other investment companies, as permitted by the Fund's policies.
6 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE SMALL CAP FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
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Class A shares* $711 $998 $1,3074 $2,179
Class B shares 714 961 1,334 2,183
Class C shares 314 661 1,134 2,441
Class R shares 184 569 980 2,127
Institutional Service Class shares 130 406 702 1,545
Institutional Class shares 113 353 612 1,352
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* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class B shares $214 $661 $1,134 $2,183
Class C shares 214 661 1,134 2,441
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** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE CORE EQUITY SERIES | 7
SECTION 1 GARTMORE SMALL CAP CORE FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by SMALL-CAP COMPANIES. The Fund invests primarily in the COMMON STOCK of small-cap U.S. companies in an attempt to provide investors with potentially higher returns than a fund that invests primarily in larger, more established companies. The Fund does not target either a GROWTH STYLE or a VALUE STYLE of investing specifically, but rather focuses on the broader small-cap market, incorporating elements of both growth and value styles.
The Adviser uses QUANTITATIVE TECHNIQUES incorporated into a multi-factor model that seeks to select securities with the potential for the highest returns in the current market environment. This model seeks to capitalize on the theory that the financial markets are dynamic and investment opportunities vary over time. In purchasing and selling securities, the Fund attempts to benefit from stock pricing anomalies based on various factors, such as:
o book-to-price;
o earnings revisions;
o earnings quality;
o price momentum;
o cash flow changes and
o market style trends.
The Fund also may use DERIVATIVES, such as futures and options, for more efficient portfolio management. In addition, the Fund may engage in securities lending in order to generate additional income.
The Fund may invest without limit in initial public offerings ("IPOs") of small-cap companies, although such IPOs may not be available for investment by the Fund or the impact of any such IPO would be uncertain.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Russell 2000(R) Index, or other funds with similar investment objectives and strategies.
SMALL-CAP RISK - results from investing in stocks of smaller companies. Smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
INITIAL PUBLIC OFFERING RISK - availability of IPOs may be limited and the Fund may not be able to buy any shares at the offering price, or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values, or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
SECURITIES LENDING RISK - the risk that the loaned securities may not be returned if the borrower or the lending agent defaults. The collateral is also subject to the risks of the securities in which it is invested.
If the value of the Fund's investments goes down, you may lose money.
PERFORMANCE
Performance information is not provided because the Fund did not complete one full year of operations as of the date of this prospectus.
8 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE SMALL CAP CORE FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses that you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INSTITUTIONAL SERVICE INSTITUTIONAL INVESTMENT) (1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE INSTITUTIONAL SERVICE INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 1.32% 1.30% 1.30% 1.50% 1.32% 1.30% ------------------------------------------------------------------------------------------------------------------------------------ Total Annual Fund Operating Expenses 2.42% 3.15% 3.15% 2.85% 2.17% 2.15% ------------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver/ Expense Reimbursement(8) 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 1.52% 2.25% 2.25% 1.95% 1.27% 1.25% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1.00% will apply to certain redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2.00% applies to shares redeemed or exchanged within 90 calendar days after the date they were purchased. This fee is intended to discourage frequent trading of Fund shares that can negatively affect the Fund's performance. The fee does not apply to shares purchased through reinvested dividends or capital gains or shares held in certain omnibus accounts or retirement plans that cannot implement the fee. See Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.02%, 0.20%, and 0.02%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.25% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.75% for Class A shares, 2.00% for Class R shares and 1.50% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
GARTMORE CORE EQUITY SERIES | 9
SECTION 1 GARTMORE SMALL CAP CORE FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
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Class A shares* $721 $1,205
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Class B shares 728 1,187
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Class C shares 328 887
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Class R shares 198 798
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Institutional Service Class shares 129 592
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Institutional Class shares 127 586
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* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS
--------------------------------------------------------------------------------
Class B shares $228 $887
--------------------------------------------------------------------------------
Class C shares 228 887
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** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
10 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by SMALL-CAP COMPANIES that, in the opinion of the portfolio managers, exhibit characteristics that are consistent with a GROWTH STYLE of investing. The Fund invests primarily in the COMMON STOCK of small-cap U.S. companies in an attempt to provide investors with potentially higher returns than a fund that invests primarily in larger, more established companies.
In managing a diversified portfolio for the Fund, the portfolio managers use a multi-step research and analysis process involving quantitative screening measures followed by traditional fundamental analysis of a company's prospects. The portfolio managers focus on companies that exhibit some or all of the following characteristics:
o strong financial characteristics;
o superior products and services;
o solid management teams;
o a threshold level of revenue growth rates;
o minimum price appreciation targets;
o accelerating earnings or revenue growth and o reasonable volume of trading in the market.
Although the Fund looks for companies with the potential for strong earnings growth rates, some of the Fund's investments may be in companies that are experiencing losses. There is no limit on the length of operating history for the companies in which the Fund may invest.
The Fund also may use DERIVATIVES, such as futures and options, for more efficient portfolio management. In addition, the Fund may engage in securities lending in order to generate additional income.
The Fund's management considers selling a security when:
o the stock attains full valuation relative to stocks of similar companies or reaches the portfolio management team's price target;
o more compelling investment opportunities are identified;
o a company's MARKET CAPITALIZATION exceeds the benchmark capitalization range;
o any change in company fundamentals occurs from the time of the original investment or
o deterioration or underperformance of the stock's market valuation takes place.
The Fund may invest without limit in initial public offerings ("IPOs") of small-cap companies, although such IPOs may not be available for investment by the Fund or the impact of any such IPO would be uncertain.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 2000(R) Growth Index or other funds with similar investment objectives and strategies.
SMALL-CAP RISK - results from investing in stocks of smaller companies. Smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
INITIAL PUBLIC OFFERING RISK - availability of IPOs may be limited and the Fund may not be able to buy any shares at the offering price, or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Growth stocks as a group may be out of favor and underperform the overall equity market for a long period of time, while the market concentrates on "value" stocks.
DERIVATIVES RISK -derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
GARTMORE CORE EQUITY SERIES | 11
SECTION 1 GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
SECURITIES LENDING RISK - the risk that the loaned securities may not be returned if the borrower or the lending agent defaults. The collateral is also subject to the risks of the securities in which it is invested.
If the value of the Fund's investments goes down, you may lose money.
PERFORMANCE
Performance information is not provided because the Fund did not complete one full year of operations as of the date of this prospectus.
12 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (cont.)
Fees and Expenses
This table describes the fees and expenses that you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INSTITUTIONAL SERVICE INSTITUTIONAL INVESTMENT) (1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE INSTITUTIONAL SERVICE INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 1.20% 1.20% 1.20% 1.40% 1.25% 1.20% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 2.40% 3.15% 3.15% 2.85% 2.20% 2.15% ------------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver/ Expense Reimbursement(8) 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/ REIMBURSEMENTS) 1.60% 2.35% 2.35% 2.05% 1.40% 1.35% |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1.00% will apply to certain redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2.00% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.00%, 0.20% and 0.05%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.35% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.85% for Class A shares, 2.10% for Class R shares and 1.60% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
GARTMORE CORE EQUITY SERIES | 13
SECTION 1 GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
--------------------------------------------------------------------------------
Class A shares* $728 $1,208
--------------------------------------------------------------------------------
Class B shares 738 1,197
--------------------------------------------------------------------------------
Class C shares 338 897
--------------------------------------------------------------------------------
Class R shares 208 808
--------------------------------------------------------------------------------
Institutional Service Class shares 143 611
--------------------------------------------------------------------------------
Institutional Class shares 137 596
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS
--------------------------------------------------------------------------------
Class B shares $238 $897
--------------------------------------------------------------------------------
Class C shares 238 897
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
14 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE SMALL CAP VALUE FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by SMALL-CAP COMPANIES that, in the opinion of the portfolio managers, exhibit characteristics that are consistent with a VALUE STYLE of investing. The Fund invests primarily in the COMMON STOCK of small-cap U.S. companies in an attempt to provide investors with potentially higher returns than a fund that invests primarily in larger, more established companies.
In managing a diversified portfolio for the Fund, the portfolio managers use a multi-step research and analysis process involving QUANTITATIVE screening measures followed by traditional fundamental analysis of a company's prospects. The portfolio managers look at factors such as earnings momentum and relative value, management action and price trends when selecting securities, and focus on companies that exhibit some or all of the following characteristics:
o attractive valuation and near-term strength of business (e.g., based on estimate revisions and earnings surprises);
o long-term growth prospects of the company and its industry;
o level of duress a company is experiencing relative to its stock's market price and market expectations;
o price-to-earnings ratio and price-to-free cash flow ratio that, in the team's opinion, reflect the best standards of value and
o quality of earnings.
The Fund may also invest in stocks that are not well recognized and stocks of special situation companies and turnarounds (companies that have experienced significant business problems but which the portfolio managers believe have favorable prospects for recovery). There is no limit on the length of operating history for the companies in which the Fund may invest.
The Fund also may use DERIVATIVES, such as futures and options, for more efficient portfolio management, and may also invest in real estate investment trusts ("REITs"). In addition, the Fund may engage in securities lending in order to generate additional income.
The Fund's management considers selling a security when:
o long-term growth prospects deteriorate;
o more compelling investment values are identified;
o near-term reported or pre-announced earnings are disappointing or recurring or
o the stock attains full valuation relative to stocks of similar companies or reaches the team's price target.
While the Fund may also sell a security if its market capitalization exceeds the definition of small-cap companies, it is not required to sell solely because of that fact.
The Fund may invest without limit in initial public offerings ("IPOs") of small-cap companies, although such IPOs may not be available for investment by the Fund or the impact of any such IPO would be uncertain.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 2000(R) Value Index, or other funds with similar investment objectives and strategies.
SMALL-CAP RISK - results from investing in stocks of smaller companies. Smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
INITIAL PUBLIC OFFERING RISK - availability of IPOs may be limited and the Fund may not be able to buy any shares at the offering price, or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
SPECIAL SITUATION COMPANIES RISK - special situation companies are companies that may be involved in acquisitions, consolidations, mergers, reorganizations or other unusual developments that can affect a company's market value. If the anticipated benefits of the developments ultimately do not materialize, the value of a special situation company may decline.
VALUE STYLE RISK - over time, a value investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Value stocks as a group may be out of favor and underperform the overall equity market for a long period of time, while the market concentrates on "growth" stocks.
GARTMORE CORE EQUITY SERIES | 15
SECTION 1 GARTMORE SMALL CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
REIT RISK - the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
SECURITIES LENDING RISK - the risk that the loaned securities may not be returned if the borrower or the lending agent defaults. The collateral is also subject to the risks of the securities in which it is invested.
If the value of the Fund's investments goes down, you may lose money.
PERFORMANCE
Performance information is not provided because the Fund did not complete one full year of operations as of the date of this prospectus.
16 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE SMALL CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses that you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INSTITUTIONAL SERVICE INSTITUTIONAL INVESTMENT) (1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT INSTITUTIONAL SERVICE INSTITUTIONAL DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 1.25% 1.25% 1.25% 1.45% 1.31% 1.25% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 2.45% 3.20% 3.20% 2.90% 2.26% 2.20% ------------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver/ Expense Reimbursement(8) 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 1.60% 2.35% 2.35% 2.05% 1.41% 1.35% |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1.00% will apply to certain redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2.00% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.00%, 0.20% and 0.06%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.35% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.85% for Class A shares, 2.10% for Class R shares and 1.60% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
GARTMORE CORE EQUITY SERIES | 17
SECTION 1 GARTMORE SMALL CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
--------------------------------------------------------------------------------
Class A shares* $728 $1,218
--------------------------------------------------------------------------------
Class B shares 738 1,207
--------------------------------------------------------------------------------
Class C shares 338 907
--------------------------------------------------------------------------------
Class R shares 208 818
--------------------------------------------------------------------------------
Institutional Service Class shares 144 625
--------------------------------------------------------------------------------
Institutional Class shares 137 606
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS
--------------------------------------------------------------------------------
Class B shares $238 $907
--------------------------------------------------------------------------------
Class C shares 238 907
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
18 | GARTMORE CORE EQUITY SERIES
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS,
INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - A Fund could lose value if the individual stocks in which it has invested and/or the overall stock markets on which the stocks trade decline in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large cap stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
SMALL-CAP RISK - in general, stocks of small-cap companies trade in lower volumes and are subject to greater or more unpredictable price changes than larger cap securities or the market overall. Small-cap companies may have limited product lines or markets, be less financially secure than larger companies, or depend on a small number of key personnel. If adverse developments occur, such as due to management changes or product failure, a Fund's investment in a small-cap company may lose substantial value. Investing in small-cap companies requires a longer term investment view and may not be appropriate for all investors.
DERIVATIVES - Each Fund may invest in derivatives, which are contracts or investments with their values based on the performance of an underlying financial asset, index or other measure. For example, an option is a derivative because its value changes in relation to the performance of an underlying stock. The value of an option on a futures contract varies with the value of the underlying futures contract, which in turn varies with the value of the underlying commodity or security. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways. Some risks of investing in derivatives include the risk that:
o the other party to the derivatives contract may fail to fulfill its obligations;
o their use may reduce liquidity and make a Fund harder to value, especially in declining markets;
o a Fund may suffer disproportionately heavy losses relative to the amount invested and
o changes in the value of derivatives may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
FOREIGN SECURITIES RISK - the Gartmore Small Cap Fund may invest in foreign securities, which may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability,
o the impact of currency exchange rate fluctuations,
o reduced information about issuers,
o higher transaction costs,
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities, the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
DEPOSITARY RECEIPTS - The Gartmore Small Cap Fund and the Gartmore Small Cap Core Fund may invest in securities of foreign issuers in the form of depositary receipts, such as American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which typically are issued by local financial institutions and evidence ownership of the underlying securities.
Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Depositary receipts may or may not be jointly sponsored by the underlying issuer. The issuers of unsponsored depositary receipts are not obligated to disclose information that is considered material in the United States. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Certain depositary receipts are not listed on an exchange and therefore may be considered to be illiquid securities.
GARTMORE CORE EQUITY SERIES | 19
SECTION 2 FUND DETAILS (CONT.)
REIT RISK - the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
PREFERRED STOCK - a class of stock that often pays dividends at a specified rate and has preference over common stock in dividend payments and liquidation of assets. Preferred stock may be convertible into common stock.
CONVERTIBLE SECURITIES - are generally debt securities or preferred stocks that may be converted into common stock. Convertibles typically pay current income as either interest (debt security convertibles) or dividends (preferred stocks). A convertible's value usually reflects both the stream of current income payments and the value of the underlying common stock. The market value of a convertible performs like that of a regular debt security, that is, if market interest rates rise, the value of a convertible usually falls. Since it is convertible into common stock, the convertible also has the same types of market and issuer risk as the underlying common stock.
WARRANTS - securities that give the holder the right to buy common stock at a specified price for a specified period of time. Warrants are considered speculative and have no value if they are not exercised before their expiration date.
SECURITIES LENDING - Each Fund may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances, these events could trigger adverse tax consequences to a Fund.
TEMPORARY INVESTMENTS - Each Fund generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if a Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances, and interest- bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which a Fund may invest directly and
o shares of other investment companies that invest in securities in which a Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and a Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
20 | GARTMORE CORE EQUITY SERIES
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Fund's respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
The Funds pay the Adviser a management fee based on each Fund's average daily net assets. The total management fee paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of each Fund's average daily net assets and taking into account any applicable waivers, was as follows:
ACTUAL MANAGEMENT
FUND FEE PAID
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 0.89%
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 0.85%
--------------------------------------------------------------------------------
Gartmore Small Cap Growth Opportunities Fund 0.95%
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 0.95%
--------------------------------------------------------------------------------
|
The total annual advisory fees that can be paid to the Adviser for each Fund (as a percentage of the average daily net assets of each Fund) are as follows:
FUND/ASSETS MANAGEMENT FEE -------------------------------------------------------------------------------- GARTMORE SMALL CAP FUND -------------------------------------------------------------------------------- Up to $100 million 0.95% -------------------------------------------------------------------------------- $100 million or more 0.80% -------------------------------------------------------------------------------- GARTMORE SMALL CAP CORE FUND -------------------------------------------------------------------------------- $0 up to $500 million 0.85% -------------------------------------------------------------------------------- $500 million up to $2 billion 0.75% -------------------------------------------------------------------------------- $2 billion and more 0.70% -------------------------------------------------------------------------------- GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND AND GARTMORE SMALL CAP VALUE FUND -------------------------------------------------------------------------------- Up to $500 million 0.95% -------------------------------------------------------------------------------- $500 million up to $2 billion 0.85% -------------------------------------------------------------------------------- $2 billion or more 0.80% -------------------------------------------------------------------------------- |
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreements for the Funds will be available in the semiannual report to shareholders for the Gartmore Small Cap Fund, which will cover the period beginning November 1, 2006 to April 30, 2007 and the annual report to shareholders for the remaining Funds, which covers the period September 29, 2006 (date of inception) through October 31, 2006.
PORTFOLIO MANAGEMENT
GARTMORE SMALL CAP FUND
William Gerlach, CFA, senior portfolio manager, and Charles Purcell, CFA, senior portfolio manager, are responsible for the day- to-day management of the Fund, including the selection of the Fund's investments. They also co-manage the Gartmore Small Cap Value Fund and a portion of each of the GVIT Small Company Fund and the GVIT Small Cap Value Fund. Mr. Gerlach currently also manages or co-manages the Gartmore Global Natural Resources Fund and the Gartmore Small Cap Leaders Fund.
Mr. Gerlach joined the Adviser in December 2003. From 1991 until he joined the Adviser, he held numerous positions at Morgan Stanley Investment Management--Miller Anderson & Sherrard, LLP. He was team leader for Mid and Small Cap Equity, managing core and value investment styles.
Mr. Purcell joined the Adviser in December 2003. From 1994 until 2003, he held numerous positions at Morgan Stanley Investment Management--Miller Anderson & Sherrard, LLP, including coportfolio manager for both Mid Cap Core and Mid Cap Value portfolios. He currently also co-manages the Gartmore Small Cap Value Fund and a portion of each of the GVIT Small Company Fund and the GVIT Small Cap Value Fund.
GARTMORE CORE EQUITY SERIES | 21
SECTION 3 FUND MANAGEMENT (CONT.)
Gary D. Haubold, CFA, senior portfolio manager, assists Mr. Gerlach and Mr. Purcell in management of the Fund. Mr. Haubold joined the Adviser in December 2003 from Edge Capital Management, an equity hedge fund he founded in 2000. Between 1997 and 2000, he was senior portfolio manager on several small-, mid- and large-cap funds at Pilgrim Baxter & Associates. Prior to Pilgrim Baxter, Mr. Haubold was a senior portfolio manager at Miller Anderson & Sherrard, LLP, which is now part of Morgan Stanley Asset Management. Mr. Haubold has over 20 years investment management experience. He currently also manages or comanages the Gartmore Nationwide Fund, the Gartmore Nationwide Leaders Fund, the Gartmore Small Cap Leaders Fund, the Gartmore Small Cap Value Fund, the Gartmore GVIT Nationwide Fund, the Gartmore GVIT Nationwide Leaders Fund and a portion of each of the GVIT Small Company Fund and the GVIT Small Cap Value Fund.
GARTMORE SMALL CAP CORE FUND
Joseph A. Cerniglia, portfolio manager and senior quantitative analyst, is responsible for the day-to-day management of both the Fund and the selection of each Fund's investments. He currently also manages or co-manages the Gartmore Hedged Core Equity Fund, the Gartmore Market Neutral Fund and the core quantitative sleeves of the Gartmore Nationwide Fund and the Gartmore GVIT Nationwide Fund.
Mr. Cerniglia joined the Adviser in September 2000 and has been responsible for developing and implementing quantitative investment strategies for the firm's equity funds. Prior to joining the Adviser, Mr. Cerniglia was an equity analyst at Pitcairn Trust Company where he was involved in both fundamental and quantitative research, including portfolio optimization routines, risk monitoring and enhanced valuation models.
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND
Jayne Stevlingson, CFA, is the portfolio manager of the Fund and is responsible for the day-to-day management of the Fund and the selection of the Fund's investments. Ms. Stevlingson currently also manages the Gartmore Global Technology and Communications Fund and the Gartmore GVIT Global Technology and Communications Fund.
Ms. Stevlingson joined the Adviser in August 2005 as a Senior Portfolio Manager. Prior to joining the Adviser, she was a principal responsible for managing a hedge fund of small and mid-cap equities at Altura Asset Management, LLC from November 2004 to July 2005. Previously, she was a vice president and senior portfolio manager at Oppenheimer Funds, Inc. from 1999 to 2003. Prior to joining Oppenheimer, she was a senior portfolio manager at Morgan Stanley. She has managed traditional and alternative funds at major asset management firms since 1992.
GARTMORE SMALL CAP VALUE FUND
Gary D. Haubold, CFA, Senior Portfolio Manager, is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. William Gerlach, CFA and Charles Purcell, CFA assist Mr. Haubold in the management of the Fund. All three portfolio managers also co-manage a portion of each of the GVIT Small Company Fund and the GVIT Small Cap Value Fund. Mr. Haubold also manages or co-manages the Gartmore Nationwide Fund, the Gartmore Nationwide Leaders Fund, the Gartmore Small Cap Fund, the Gartmore Small Cap Leaders Fund, the Gartmore GVIT Nationwide Fund and the Gartmore GVIT Nationwide Leaders Fund. Mr. Gerlach also manages or comanages the Gartmore Global Natural Resources Fund and the Gartmore Small Cap Leaders Fund.
Mr. Haubold joined the Adviser in December 2003 from Edge Capital Management, an equity hedge fund he founded in 2000. Between 1997 and 2000, he was senior portfolio manager of several small, mid, and large-cap funds at Pilgrim Baxter & Associates. Prior to Pilgrim Baxter, he was a senior portfolio manager at Miller Anderson & Sherrard, LLP, which is now part of Morgan Stanley Investment Management. Mr. Haubold has over 20 years investment management experience.
Mr. Gerlach joined the Adviser in December 2003. From 1991 until he joined the Adviser, he held numerous positions at Morgan Stanley Investment Management--Miller Anderson & Sherrard, LLP.
Mr. Purcell joined the Adviser in December 2003. From 1994 until 2003, he held numerous positions at Morgan Stanley Investment Management--Miller Anderson & Sherrard, LLP, including co-portfolio manager for both Mid Cap Core and Mid Cap Value portfolios.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by each portfolio manager and each portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
22 | GARTMORE CORE EQUITY SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a nonaffiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are managed by the Adviser, but if a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows these Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
GARTMORE CORE EQUITY SERIES | 23
SECTION 4 INVESTING WITH GARTMORE FUNDS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class shares and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND
CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES
Front-end sales charge A front-end sales charge means that a
up to 5.75% portion of your initial investment goes
toward the sales charge and is not
invested.
Contingent deferred Reduction and waivers of sales charges may
sales charge (CDSC)(1) be available.
Annual service and/or Total annual operating expenses are lower
12b-1 fee of 0.25% than Class B and Class C expenses, which
Administrative services means higher dividends and/or net asset
fee up to 0.25% value ("NAV") per share.
No conversion feature.
No maximum investment amount.
-----------------------------------------------------------------------------
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full
investment immediately goes toward buying
shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines 1% in most years to zero
after six years.
Annual service and/or Total annual operating expenses are higher
12b-1 fee of 1.00% than Class A expenses, which means lower
No administrative dividends and/or NAV per share.
services fee
Automatic conversion to Class A shares
after seven years, which means lower
annual expenses in the future.
Maximum investment amount of $100,000.
Larger investments may be rejected.
-------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full
investment immediately goes toward
buying shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are higher
12b-1 fee of 1.00% than Class A expenses, which means lower
No administrative dividends and/or NAV per share.
services fee
No conversion feature.
Maximum investment amount of $1,000,000(2).
Larger investments may be rejected.
|
1 Unless you are eligible to purchase Class A shares without a salescharge, a CDSC of up to 1.00% (0.50% with respect to Class A shares ofthe Gartmore Small Cap Fund) may be charged on Class A sharesredeemed within 18 months of purchase if you paid no sales charge onthe original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
24 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
SALES CHARGE AS A PERCENTAGE OF
------------------------------- DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
--------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
--------------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
--------------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
--------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
--------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
--------------------------------------------------------------------------------
$1 million or more None None None*
--------------------------------------------------------------------------------
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* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
GARTMORE CORE EQUITY SERIES | 25
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
WAIVER OF CLASS A SALES CHARGES
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker- dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front- end sales
charge. You can purchase $1 million or more in Class A shares in one or more of
the funds offered by the Trust (including the Funds in this prospectus) at one
time. Or, you can utilize the Rights of Accumulation Discount and Letter of
Intent Discount as described above. However, a contingent deferred sales charge
(CDSC) of up to 1.00% (0.50% with respect to the Gartmore Small Cap Fund)
applies if a "finders fee" is paid by the Distributor to your financial adviser
or intermediary and you redeem your shares within 18 months of purchase. The
CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason;
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES--EXCEPT GARTMORE SMALL CAP FUND:
AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% -------------------------------------------------------------------------------- |
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES OF GARTMORE SMALL CAP FUND:
AMOUNT OF $1 MILLION $25 MILLION PURCHASE TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 0.50% 0.25% -------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges--Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund(s) is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
26 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
WAIVER OF CONTINGENT DEFERRED SALES CHARGES
CLASS A, CLASS B AND CLASS C SHARES
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC
(if you are not entitled to a waiver). The amount of the CDSC decreases as shown
in the following table:
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
--------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
--------------------------------------------------------------------------------
|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1%.
SHARE CLASSES AVAILABLE ONLY TO INSTITUTIONAL ACCOUNTS
The Funds offer Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial services firm has an agreement with the Distributor to use Class R shares.
GARTMORE CORE EQUITY SERIES | 27
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Funds;
o retirement plans for which no third-party administrator receives compensation from the Fund(s);
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept
or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment
Company Act of 1940, which permits Class A, Class B, Class C and Class R shares
of the Funds to compensate the Distributor for expenses associated with
distributing and selling shares and providing shareholder services through
distribution and/or services fees. These fees are paid to the Distributor and
are either kept or paid to your financial adviser or other intermediary for
distribution and shareholder services. Institutional Class and Institutional
Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
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ADMINISTRATIVE SERVICES FEES
Class A, Class R and Institutional Service Class shares of the Funds are subject
to fees pursuant to an Administrative Services Plan adopted by the Board of
Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class
A and Class R shares as described above.) These fees are paid by the Funds to
broker- dealers or other financial intermediaries who provide administrative
support services to beneficial shareholders on behalf of the Funds. Under the
Administrative Services Plan, a Fund may pay a broker-dealer or other
intermediary a maximum annual fee of 0.25% for Class A, Class R and
Institutional Service Class shares; however, many intermediaries do not charge
the maximum permitted fee or even a portion thereof.
28 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
Because these fees are paid out of a Fund's Class A, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
GARTMORE CORE EQUITY SERIES | 29
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B AND CLASS C SHARES
All transaction orders must be received by the Funds' agent in Columbus, Ohio or
an authorized intermediary prior to the calculation of each Fund's NAV to
receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS.
THE OFFERING OF SHARES AT ANY TIME.
** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
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THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, exchange intermediaries who are authorized to accept purchase, exchange
and redemption orders for the Funds. Your transaction is and redemption orders for the Funds. Your transaction is
processed at the NAV next calculated after the Funds' agent or processed at the NAV next calculated after the Funds' agent or
an authorized intermediary receives your order in proper form. an authorized intermediary receives your order in proper form.
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BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. mailing or faxing a letter to Gartmore Funds. The letter must
dollars and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT CASH, include your account number(s) and the name(s) of the Fund(s)
STARTER CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, CREDIT you wish to exchange from and to. The letter must be signed by
CARD CHECKS OR MONEY ORDERS. all account owners. We reserve the right to request original
documents for any faxed requests.
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BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The Funds unless you decline this option on your application. The Funds
follow procedures to confirm that telephone instructions are follow procedures to confirm that telephone instructions are
genuine and will not be liable for any loss, injury, damage or genuine and will not be liable for any loss, injury, damage or
expense that results from executing such instructions. The expense that results from executing such instructions. The Funds
Funds may revoke telephone privileges at any time, without may revoke telephone privileges at any time, without notice to
notice to shareholders. shareholders. For redemptions, shareholders who own shares in
an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES: A check made payable
to the shareholder(s) of record will be mailed to the address of
record.
The Funds may record telephone instructions to redeem shares and
may request redemption instructions in writing, signed by all
shareholders on the account.
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ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line website. However, the Funds may discontinue on-line
transactions of Fund shares at any time. transactions of Fund shares at any time.
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BY BANK WIRE. You may have your bank transmit funds by federal BY BANK WIRE. The Funds can wire the proceeds of your
funds wire to the Funds' custodian bank. (The authorization redemption directly to your account at a commercial bank. A
will be in effect unless you give the Funds written notice of voided check must be attached to your application. (The
its termination.) authorization will be in effect unless you give the Funds
written notice of its termination.)
o if you choose this method to open a new account, you must
call our toll-free number before you wire your investment o your proceeds typically will be wired to your bank on the next
and arrange to fax your completed application. business day after your order has been processed.
o Gartmore Funds deducts a $20 service fee from the
o your bank may charge a fee to wire funds. redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in order to receive o your financial institution may also charge a fee for
the current day's NAV. receiving the wire.
o funds sent outside the U.S. may be subject to higher fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund your Gartmore BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds can
Funds' account with proceeds from your bank via ACH on the be sent to your bank via ACH on the second business day after
second business day after your purchase order has been your order has been processed. A voided check must be attached
processed. A voided check must be attached to your application. to your application. Money sent through ACH should reach your
Money sent through ACH typically reaches Gartmore Funds from to your application. Money sent through ACH should reach your
your bank in two business days. There is no fee for this (The authorization will be in effect unless you give the Funds
service. (The authorization will be in effect unless you give written notice of its termination.)
the Funds written notice of its termination.)
ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans or plan administrator regarding transactions. Retirement plans or
their administrators wishing to conduct transactions should their administrators wishing to conduct transactions should
call our toll-free number. Eligible entities or individuals call our toll-free number. Eligible entities or individuals
wishing to conduct transactions in Institutional Service Class wishing to conduct transactions in Institutional Service Class
or Institutional Class shares should call our toll- free number. or Institutional Class shares should call our toll-free number.
|
30 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
The Funds do not calculate NAV on days when the New York Stock Exchange is closed.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
GARTMORE CORE EQUITY SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
MINIMUM INVESTMENTS
CLASS A, CLASS B AND CLASS C SHARES
To open an account $ 2,000 (per Fund) To open an IRA account $ 1,000 (per Fund) Additional investments $ 100 (per Fund) To start an Automatic Asset Accumulation Plan $ 1,000 (per Fund) Additional investments (Automatic Asset Accumulation Plan) $ 50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $ 50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker- dealer or financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross- referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities.
Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
32 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund).
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell or, in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or the Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
MEDALLION SIGNATURE GUARANTEE
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
GARTMORE CORE EQUITY SERIES | 33
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or redemptions and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser, its subadvisers and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
34 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 701/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund for less than the minimum holding period listed below:
Minimum
Exchange/ Holding Period
Fund Redemption Fee (calendar days)
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Gartmore China Opportunities Fund 2.00% 90
Gartmore Emerging Markets Fund 2.00% 90
Gartmore Global Financial Services Fund 2.00% 90
Gartmore Global Health Sciences Fund 2.00% 90
Gartmore Global Natural Resources Fund 2.00% 90
Gartmore Global Technology
and Communications Fund 2.00% 90
Gartmore Global Utilities Fund 2.00% 90
Gartmore Hedged Core Equity Fund 2.00% 90
Gartmore International Growth Fund 2.00% 90
Gartmore Market Neutral Fund 2.00% 90
Gartmore Micro Cap Equity Fund 2.00% 90
Gartmore Mid Cap Growth Fund 2.00% 90
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
Gartmore Small Cap Fund 2.00% 90
Gartmore Small Cap Core Fund 2.00% 90
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
Gartmore Small Cap Leaders Fund 2.00% 90
Gartmore Small Cap Value Fund 2.00% 90
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
Gartmore Value Opportunities Fund 2.00% 90
Gartmore Worldwide Leaders Fund 2.00% 90
NorthPointe Small Cap Growth Fund 2.00% 90
Gartmore Growth Fund 2.00% 30
Gartmore Large Cap Value Fund 2.00% 30
Gartmore Nationwide Fund 2.00% 30
Gartmore Nationwide Leaders Fund 2.00% 30
Gartmore U.S. Growth Leaders Fund 2.00% 30
Gartmore Bond Fund 2.00% 7
Gartmore Bond Index Fund 2.00% 7
Gartmore Government Bond Fund 2.00% 7
Gartmore International Index Fund 2.00% 7
Gartmore Mid Cap Market Index Fund 2.00% 7
Gartmore S&P 500 Index Fund 2.00% 7
Gartmore Short Duration Bond Fund 2.00% 7
Gartmore Small Cap Index Fund 2.00% 7
Gartmore Tax-Free Income Fund 2.00% 7
|
GARTMORE CORE EQUITY SERIES | 35
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
36 | GARTMORE CORE EQUITY SERIES
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-
DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gains distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
GARTMORE CORE EQUITY SERIES | 37
SECTION 6 GARTMORE SMALL CAP FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31 or, if a Fund or a class has not been inoperation for five years, for the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that aninvestor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited byPricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES DISTRIBUTIONS
------------------------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET NET
BEGINNING INCOME (LOSSES) ON INVESTMENT INVESTMENT REALIZED TOTAL REDEMPTION
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES INCOME GAINS DISTRIBUTION FEES
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $10.79 (0.02) (1.16) (1.18) -- -- -- --
Year Ended October 31, 2003 $ 9.61 (0.05) 4.12 4.07 -- -- -- --
Year Ended October 31, 2004 $13.68 (0.09) 2.12 2.03 -- (0.17) (0.17) 0.05
Year Ended October 31, 2005 $15.59 (0.03) 4.65 4.62 -- (1.93) (1.93) --
Year Ended October 31, 2006 $18.28 -- 5.18 5.18 (0.01) (2.16) (2.17) 0.01
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $10.61 (0.09) (1.13) (1.22) -- -- -- --
Year Ended October 31, 2003 $ 9.39 (0.10) 4.00 3.90 -- -- -- --
Year Ended October 31, 2004 $13.29 (0.17) 2.04 1.87 -- (0.17) (0.17) 0.05
Year Ended October 31, 2005 $15.04 (0.12) 4.46 4.34 -- (1.93) (1.93) --
Year Ended October 31, 2006 $17.45 (0.07) 4.87 4.80 -- (2.16) (2.16) 0.01
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $10.63 (0.09) (1.13) (1.22) -- -- -- --
Year Ended October 31, 2003 $ 9.41 (0.09) 3.99 3.90 -- -- -- --
Year Ended October 31, 2004 $13.31 (0.13) 2.01 1.88 -- (0.17) (0.17) 0.05
Year Ended October 31, 2005(h) $15.07 (0.17) 4.51 4.34 -- (1.93) (1.93) --
Year Ended October 31, 2006 $17.48 (0.06) 4.87 4.81 -- (2.16) (2.16) 0.01
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004(d) $14.03 (0.09) 1.11 1.07 -- -- -- 0.05
Year Ended October 31, 2005 $15.10 (0.03) 4.49 4.46 -- (1.93) (1.93) --
Year Ended October 31, 2006 $17.63 -- 4.97 4.97 (0.02) (2.16) (2.18) 0.01
------------------------------------------------------------------------------------------------------------------------------------
|
[RESTUBBED TABLE]
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
NET ASSET AT END OF EXPENSES (LOSS) TO MENTS( TO MENTS( TO
VALUE END TOTAL PERIOD) TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
OF PERIOD RETURN (A) (000s) NET ASSETS NET ASSETS ASSETS (B) ASSETS (B) TURNOVER (C)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9.61 (10.94%) $ 20,290 1.51% (0.24%) 1.72% (0.45%) 111.00%
Year Ended October 31, 2003 $13.68 42.35% $ 21,198 1.59% (0.37%) 1.70% (0.48%) 100.05%
Year Ended October 31, 2004 $15.59 15.33% $ 23,023 1.59% (0.55%) (i) (i) 341.57%
Year Ended October 31, 2005 $18.28 31.51% $ 40,539 1.67% (0.27%) 1.69 (0.28%) 292.46%
Year Ended October 31, 2006 $21.30 30.98% $376,718 1.39% 0.00% 1.39% 0.00% 219.51%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 9.39 (11.50%) $ 950 2.17% (0.89%) 2.41% (1.13%) 111.00%
Year Ended October 31, 2003 $13.29 41.53% $ 1,368 2.20% (1.00%) 2.30% (1.10%) 100.05%
Year Ended October 31, 2004 $15.04 14.57% 1,496 2.20% (1.16%) (i) (i) 341.57%
Year Ended October 31, 2005 $17.45 30.72% 2,302 2.29% (0.88%) 2.32% (0.90%) 292.46%
Year Ended October 31, 2006 $20.10 30.16% $ 11,701 2.08% (0.63%) 2.08% (0.63%) 219.51%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 9.41 (11.48%) $ 28 2.17% (0.90%) 2.47% (1.20%) 111.00%
Year Ended October 31, 2003 $13.31 41.45% $ 89 2.20% (1.04%) 2.31% (1.15%) 100.05%
Year Ended October 31, 2004 $15.07 14.62% $ 180 2.20% (1.16%) (i) (i) 341.57%
Year Ended October 31, 2005(h) $17.48 30.67% $ 5,468 2.33% (1.00%) 2.33% (1.00%) 292.46%
Year Ended October 31, 2006 $20.14 30.17% $115,138 2.06% (0.72%) 2.07% (0.72%) 219.51%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004(d) $15.10 7.63%(f) $ 1 1.73%(g) (0.63%)(g) (i) (i) 341.57%
Year Ended October 31, 2005 $17.63 31.47% $ 152 1.74% (0.25%) 1.74% (0.25%) 292.46%
Year Ended October 31, 2006 $20.43 30.87% $ 1,431 1.68% (0.30%) 1.68% (0.30%) 219.51%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Exclude sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio Turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(e) For the period from June 29, 2004 (commencement of opertions) through October 31, 2004.
(f) Not annualized.
(g) Annualized.
(h) Net investment income (loss) is based on average shares outstanding during the period.
(i) There were no fee reductions during the period.
(j) The amount is less than $1,000.
38 | GARTMORE CORE EQUITY SERIES
SECTION 6 GARTMORE SMALL CAP FUND FINANCIAL HIGHLIGHTS (cont.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES DISTRIBUTIONS
------------------------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET NET
BEGINNING INCOME (LOSSES) ON INVESTMENT INVESTMENT REALIZED TOTAL REDEMPTION
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES INCOME GAINS DISTRIBUTION FEES
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $10.84 (0.01) (1.16) (1.17) -- -- -- --
Year Ended October 31, 2003 $ 9.67 (0.02) 4.14 4.12 -- -- -- --
Year Ended October 31, 2004(h) $13.79 (0.06) 2.11 2.05 -- (0.17) (0.17) 0.05
Year Ended October 31, 2005 $15.72 0.11 4.62 4.73 -- (1.93) (1.93) --
Year Ended October 31, 2006 $18.52 0.02 5.35 5.37 (0.02) (2.16) (2.18) 0.01
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004(e) $15.64 (0.01) 0.07 0.06 -- -- -- 0.05
Year Ended October 31, 2005 $15.75 0.01 4.72 4.73 -- (1.93) (1.93) --
Year Ended October 31, 2006 $18.55 0.06 5.30 5.36 (0.03) (2.16) (2.19) 0.01
------------------------------------------------------------------------------------------------------------------------------------
|
[RESTUBBED TABLE]
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
NET ASSET AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
VALUE END TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
OF PERIOD RETURN (a) (000S) NET ASSETS NET ASSETS ASSETS (B) ASSETS (B) TURNOVER (C)
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 9.67 (10.79%) $ 5,856 1.38% (0.11%) 1.57% (0.30%) 111.00%
Year Ended October 31, 2003 $13.79 42.61% $ 18,584 1.45% (0.35%) 1.54% (0.44%) 100.05%
Year Ended October 31, 2004 $15.72 15.43% $ 7 1.45% (0.39%) (i) (i) 341.57%
Year Ended October 31, 2005 $18.52 31.91% $ -(j) 1.49% 0.76% 1.58 0.68% 292.46%
Year Ended October 31, 2006 $21.72 31.64% $ 11,945 1.25% (0.04%) 1.26% (0.05%) 219.51%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004(d) $15.75 0.70%(f) $ 120 1.20%(g) (0.22%)(g) (i) (i) 341.57%
Year Ended October 31, 2005 $18.55 31.93% $ 1,120 1.32% 0.12% 1.32% 0.12% 292.46%
Year Ended October 31, 2006 $21.73 31.52% $ 41,396 1.06% 0.41% 1.07% 0.41% 219.51%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Exclude sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio Turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(e) For the period from June 29, 2004 (commencement of opertions) through October 31, 2004.
(f) Not annualized.
(g) Annualized.
(h) Net investment income (loss) is based on average shares outstanding during the period.
(i) There were no fee reductions during the period.
(j) The amount is less than $1,000.
GARTMORE CORE EQUITY SERIES | 39
SECTION 6 GARTMORE SMALL CAP CORE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT VALUE, END
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES OF PERIOD TOTAL RETURN (a)
-----------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.39 0.39 $10.39 3.90%(f)
-----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.39 0.38 $10.38 3.80%(f)
-----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.39 0.38 $10.38 3.80%(f)
-----------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.39 0.39 $10.39 3.90%(f)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.39 0.39 $10.39 3.90%(f)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.39 0.39 $10.39 3.90%(f)
-----------------------------------------------------------------------------------------------------------------------
|
[RESTUBBED TABLE]
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF
RATIO RATIO OF NET INVESTMENT
OF NET EXPENSES INCOME (LOSS)
NET ASSETS RATIO OF INVESTMENT (PRIOR TO (PRIOR TO
AT END EXPENSES INCOME (LOSS) REIMBURSEMENTS) REIMBURSEMENTS)
PERIOD TO AVERAGE TO AVERAGE TO AVERAGE NET TO AVERAGE PORTFOLIO
(000s) NET ASSETS NET ASSETS ASSETS (B) NET ASSETS (B) TURNOVER (C)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006(d) $ 1 1.52%(g) 0.38%)(g) 2.56%(g) (1.42%)(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006(d) $ 1 2.25%(g) (0.81%)(g) 3.17%(g) (1.73%)(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006(d) $ 1 2.25%(g) (0.81%)(g) 3.17%(g) (1.73%)(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006(d) $ 1 1.99%(g) (0.45%)(g) 3.07%(g) (1.53%)(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006(d) $ 1 1.27%(g) 0.26% (g) 2.52%(g) (0.98%)(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Period Ended October 31, 2006(d) $ 5,197 1.25%(g) 0.20%(g) 2.27%(g) (0.82%)(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Exclude sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio Turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 29, 2006 (commencement of operations) through October 31, 2006.
(e) Amount is less than $0.005.
(f) Not annualized.
(g) Annualized.
40 | GARTMORE CORE EQUITY SERIES
SECTION 6 GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT VALUE, END
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES OF PERIOD TOTAL RETURN (a)
-----------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.67 0.66 $10.66 6.60%(e)
-----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.66 0.65 $10.65 6.50%(e)
-----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.66 0.65 $10.65 6.50%(e)
-----------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.67 0.66 $10.66 6.60%(e)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006(d) $10.00 -(g) 0.66 0.66 $10.66 6.60%(e)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2006(d) $10.00 -(g) 0.66 0.66 $10.66 6.60%(e)
-----------------------------------------------------------------------------------------------------------------------
|
[RESTUBBED TABLE]
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF
RATIO RATIO OF NET INVESTMENT
OF NET EXPENSES INCOME (LOSS)
NET ASSETS RATIO OF INVESTMENT (PRIOR TO (PRIOR TO
AT END EXPENSES INCOME (LOSS) REIMBURSEMENTS) REIMBURSEMENTS)
PERIOD TO AVERAGE TO AVERAGE TO AVERAGE NET TO AVERAGE PORTFOLIO
(000s) NET ASSETS NET ASSETS ASSETS (B) NET ASSETS (B) TURNOVER (C)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006(d) $ 1 1.44%(f) (0.54%)(f) 2.15%(f) (1.25%)(f) 37.38%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006(d) $ 1 2.35%(f) (1.53%)(f) 3.40%(f) (2.58%)(f) 37.38%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006(d) $ 1 2.35%(f) (1.53%)(f) 3.40%(f) (2.58%)(f) 37.38%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006(d) $ 1 2.11%(f) (1.18%)(f) 3.02%(f) (2.09%)(f) 37.38%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006(d) $ 1 1.40%(f) (0.47%)(f) 2.46%(f) (1.53%)(f) 37.38%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Period Ended October 31, 2006(d) $ 5,432 1.35%(f) (0.41%)(f) 2.35%(f) (1.41%)(f) 37.38%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Exclude sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio Turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 29, 2006 (commencement of operations) through October 31, 2006.
(e) Not annualized.
(f) Annualized.
(g) Amount is less than $0.005.
GARTMORE CORE EQUITY SERIES | 41
SECTION 6 GARTMORE SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT VALUE, END
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES OF PERIOD TOTAL RETURN (a)
-----------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.45 0.45 $10.45 4.50%(f)
-----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.45 0.44 $10.44 4.40%(f)
-----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006(d) $10.00 (0.01) 0.45 0.44 $10.44 4.40%(f)
-----------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.45 0.45 $10.45 4.50%(f)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.45 0.45 $10.45 4.50%(f)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2006(d) $10.00 -(e) 0.45 0.45 $10.45 4.50%(f)
-----------------------------------------------------------------------------------------------------------------------
|
[RESTUBBED TABLE]
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF
RATIO RATIO OF NET INVESTMENT
OF NET EXPENSES INCOME (LOSS)
NET ASSETS RATIO OF INVESTMENT (PRIOR TO (PRIOR TO
AT END EXPENSES INCOME (LOSS) REIMBURSEMENTS) REIMBURSEMENTS)
PERIOD TO AVERAGE TO AVERAGE TO AVERAGE NET TO AVERAGE PORTFOLIO
(000s) NET ASSETS NET ASSETS ASSETS (B) NET ASSETS (B) TURNOVER (C)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006(d) $ 1 1.40%(g) 0.13% (g) 2.08%(g) (0.56%)(g) 194.16%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006(d) $ 1 2.35%(g) (0.82%)(g) 3.40%(g) (1.87%)(g) 194.16%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006(d) $ 1 2.35%(g) (0.82%)(g) 3.40%(g) (1.87%)(g) 194.16%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006(d) $ 1 2.11%(g) (0.47%)(g) 3.10%(g) (1.46%)(g) 194.16%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006(d) $ 1 1.41%(g) 0.22% (g) 2.47%(g) (0.83%)(g) 194.16%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
Period Ended October 31, 2006(d) $ 5,325 1.35%(g) 0.26%)(g) 2.35%(g) (0.73%)(g) 194.16%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Exclude sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio Turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 29, 2006 (commencement of operations) through October 31, 2006.
(e) Amount is less than $0.005.
(f) Not annualized.
(g) Annualized.
42 | GARTMORE CORE EQUITY SERIES
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This page intentionally left blank.
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents - which may be obtained free of charge--contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. -9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for closing share prices. Also, visit the Gartmore Funds' website at www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE
COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov;
o by electronic request to publicinfo@sec.gov;
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-SC 2/07
CORE FIXED INCOME Series
Gartmore Bond Fund
Gartmore Government Bond Fund
Gartmore Tax-Free Income Fund
Class X and Class Y Shares
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
CORE FIXED INCOME Series
Fixed-income funds designed to form the foundation of an asset allocation
program.
FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore Bond Fund Class X GBXDX -------------------------------------------------------------------------------- Gartmore Bond Fund Class Y GBDYX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Class X GGXYX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Class Y GGVYX -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund Class X GXTFX -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund Class Y GTFYX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 Key Terms
4 Section 1: Fund Summaries and Performance
Gartmore Bond Fund
Gartmore Government Bond Fund
Gartmore Tax-Free Income Fund
13 Section 2: Fund Details
Additional Information about Investments,
Investment Techniques and Risks
16 Section 3: Fund Management
Investment Adviser
Portfolio Management
Multi-Manager Structure
18 Section 4: Investing with Gartmore Funds
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
29 Section 5: Distributions and Taxes
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and
Other Tax-Deferred Accounts
Backup Withholding
31 Section 6: Financial Highlights
|
GARTMORE CORE FIXED INCOME SERIES | 1
CORE FIXED INCOME Series
INTRODUCTION TO THE CORE FIXED INCOME SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT THREE FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
Gartmore Bond Fund
Gartmore Government Bond Fund
Gartmore Tax-Free Income Fund
THE FUNDS ARE PRIMARILY INTENDED:
o to help investors to seek current income through investments in various government, corporate and short-term debt securities.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
Each of Gartmore Bond Fund and Gartmore Government Bond Fund offers eight share classes -- Class A, Class B, Class C, Class D, Class R and Institutional Class (all of which are offered in another prospectus) and Class X and Class Y (which are offered in this prospectus). Gartmore Tax-Free Income Fund offers six share classes--Class A, Class B, Class C and Class D (all of which are offered in another prospectus) and Class X and Class Y (which are offered in this prospectus). Before September 1, 2003, Class X and Class Y shares were designated as Class B and Class C shares, respectively.
CLASS X AND CLASS Y SHARES ARE NOT AVAILABLE TO NEW INVESTORS. SHAREHOLDERS WHO CURRENTLY OWN CLASS X AND CLASS Y SHARES ARE ELIGIBLE TO PURCHASE SHARES OF THE FUND(S) THEY OWN.
An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Although each Fund is currently managed by Gartmore Mutual Fund Capital Trust (the "Adviser"), each Fund may employ a "multimanager" structure, which means that the Adviser, as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE CORE FIXED INCOME SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
ASSET-BACKED SECURITIES - fixed-income securities issued by a trust or other legal entity established for the purpose of issuing securities and holding certain assets, such as credit card receivables or auto leases, that pay down over time and generate sufficient cash to pay holders of the securities.
COMMERCIAL PAPER - short-term debt instruments, usually unsecured, that are issued by banks and corporations in order to finance their short-term credit needs, such as accounts receivable or inventory, and that are acquired at either a discount or are interest bearing.
CORPORATE BONDS - debt securities issued by corporate issuers, as distinct from fixed-income securities issued by a government or its agencies or instrumentalities.
DERIVATIVE - a contract the value of which is based on the performance of an underlying financial asset, index or economic measure.
DURATION - related in part to the remaining time until maturity of a bond, duration is a measure of how much the price of a bond would change compared to a change in market interest rates. A bond's value drops when interest rates rise, and vice versa. Bonds with longer durations have higher risk and volatility.
FIXED-INCOME SECURITIES - securities, including bonds and other debt securities, that represent an obligation by the issuer to pay a specified rate of interest or dividend at specified times.
HIGH-YIELD BONDS - fixed-income securities rated below investment grade by nationally recognized statistical rating organizations, including Moody's, Standard & Poor's and Fitch, or unrated securities that Fund management believes are of comparable quality. These bonds are often referred to as "junk bonds." They generally offer investors higher interest rates as a way to help compensate for the fact that the issuer is at greater risk of default.
INVESTMENT GRADE - the four highest rating categories of nationally recognized statistical rating organizations, including Moody's, Standard & Poor's and Fitch.
MATURITY - the time at which the principal amount of a bond is scheduled to be returned to investors.
MORTGAGE-BACKED SECURITIES - fixed-income securities that give the holder the right to receive a portion of principal and/or interest payments made on a pool of residential or commercial mortgage loans, which in some cases are guaranteed by government agencies.
MUNICIPAL OBLIGATIONS - fixed-income securities issued by, or on behalf of, states, cities and other local governmental entities, to pay for construction and other projects. They are loans that investors make to a governmental entity; the governmental entity gets the cash it needs to complete its project and the lenders earn interest payments and get their principal back. Municipal obligations that qualify pay interest that is generally exempt from federal income taxes, although certain investors may nonetheless be subject to federal alternative minimum tax.
TOTAL RETURN - investment return that reflects both capital appreciation or depreciation (increase or decrease in the market value of a security) and income (i.e., interest or dividends).
U.S. GOVERNMENT AGENCY SECURITIES - debt securities issued and/or guaranteed as to principal and interest by U.S. government agencies, U.S. government sponsored enterprises and U.S. government instrumentalities that are not direct obligations of the United States. Such securities may not be supported by the full faith and credit of the United States.
U.S. GOVERNMENT SECURITIES - debt securities issued and/or guaranteed as to principal and interest by the U.S. government that are supported by the full faith and credit of the United States.
GARTMORE CORE FIXED INCOME SERIES | 3
SECTION 1 GARTMORE BOND FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks as high a level of current income as is consistent with preserving capital.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of it net assets in FIXED-INCOME SECURITIES that are INVESTMENT GRADE, including CORPORATE BONDS, U.S. GOVERNMENT SECURITIES and U.S. GOVERNMENT AGENCY SECURITIES. The Fund seeks to achieve its objective by investing in securities offering the highest level of expected income while simultaneously minimizing market price fluctuations.
The Fund may also invest a portion of its assets in:
o MORTGAGE-BACKED SECURITIES;
o ASSET-BACKED SECURITIES;
o FOREIGN GOVERNMENT AND CORPORATE BONDS, denominated in U.S. dollars;
o COMMERCIAL PAPER rated by a rating agency in one of the two highest rating categories;
o HIGH-YIELD BONDS and
o DERIVATIVES.
In selecting securities, the Fund's management typically maintains an average portfolio DURATION of three to seven years.
The Fund's management seeks value and may sell a security to take advantage of more favorable opportunities. The Fund also may sell a bond as it gets closer to its MATURITY in order to maintain the Fund's target duration and achieve an attractive TOTAL RETURN.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a bond issuer may be unable to pay the interest or principal when due. This risk is more pronounced with high-yield bonds and other lower rated securities.
SELECTION RISK - the portfolio managers may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
LOWER RATED SECURITIES RISK - refers to the risk that the Fund's investment in high-yield bonds and other lower rated bonds will subject the Fund to substantial risk of loss.
EVENT RISK - the risk that corporate issuers may undergo restructurings, such as mergers, leveraged buyouts, takeovers or similar events, which may be financed by increased debt. As a result of the added debt, the credit quality and the market value of a company's bonds may decline significantly.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE BOND FUND SUMMARY AND PERFORMANCE (cont.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. Returns through May 11, 1998, are based on the performance of the Fund's predecessor fund. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS X SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ----------------------------------------------------------------------------------------------------------------------------------- 9.30% 7.80% -3.70% 6.60% 9.00% 8.40% 5.50% 4.01% 2.42% 3.58% |
BEST QUARTER: 4.97% -3RD QTR OF 2002
WORST QUARTER: -2.99% -2ND QTR OF 2004
After-tax returns are shown in the table for Class X shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class X shares - Before Taxes(2) -1.39% 4.42% 5.22%
--------------------------------------------------------------------------------
Class X shares - After Taxes
on Distributions (2) -2.88% 2.88% 3.31%
--------------------------------------------------------------------------------
Class X shares - After Taxes on
Distributions and Sales of Shares(2) -0.93% 2.86% 3.28%
--------------------------------------------------------------------------------
Class Y shares - Before Taxes(2) 2.58% 4.75% 5.43%
--------------------------------------------------------------------------------
Lehman Brothers Government/Credit
Bond Index(3) 3.80% 5.17% 6.26%
--------------------------------------------------------------------------------
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1 Total returns include the impact of any sales charges and assume
redemption of shares at the end of each period.
2 Returns through May 11, 1998 include the performance of the Fund's
predecessor Fund. For the period May 12, 1998 through March 1, 2001,
Class Y shares include the previous performance of the Fund's Class D
shares. These returns were created prior to the creation of Class X
(May 11, 1998) and Class Y (March 1, 2001). This performance is
substantially similar to what the individual classes would have
produced because these classes all invest in the same portfolio of
securities. Performance has been adjusted to reflect differences in
applicable sales charges, if any, for individual classes. Performance
has not been adjusted to reflect different expense levels, which if
reflected may have resulted in higher or lower performance for a given
share class.
3 The Lehman Brothers Government/Credit Bond Index is an unmanaged index
of U.S. government and investment-grade corporate bonds with at least
one year to maturity. The Index does not pay sales charges, fees or
expenses. If sales charges, fees and expenses were deducted, the actual
returns of the Index would be lower. Individuals cannot invest directly
in an index.
GARTMORE CORE FIXED INCOME SERIES | 5
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SECTION 1 GARTMORE BOND FUND SUMMARY AND PERFORMANCE (cont.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select:
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)(1) CLASS X SHARES CLASS Y SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) None None -------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) 5.00%(2) 1.00%(3) -------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(4) 2.00% 2.00% -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) CLASS X SHARES CLASS Y SHARES -------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.50% 0.50% -------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.85% 0.85% -------------------------------------------------------------------------------- Other Expenses 0.26% 0.26% -------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 1.61% 1.61% -------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial
intermediary, the intermediary may charge a separate transaction fee.
2 A contingent deferred sales charge (CDSC) beginning at 5% and declining
to 1% is charged if you sell Class X shares within six years after
purchase. Class X shares convert to Class A shares after you have held
them for seven years. See Section 4, Investing with Gartmore Funds:
Choosing a Share Class--Class X Shares.
3 A CDSC of 1% is charged if you sell Class Y shares within the first
year after purchase. See Section 4, Investing with Gartmore Funds:
Choosing a Share Class--Class Y Shares.
4 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee
is intended to discourage frequent trading of Fund shares that can
negatively affect the Fund's performance. The fee does not apply to
shares purchased through reinvested dividends or capital gains or
shares held in certain omnibus accounts or retirement plans that cannot
implement the fee. See Section 4, Investing with Gartmore Funds:
Exchange and Redemption Fees.
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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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
------------------------------------------------------------
Class X shares $ 664 $ 808 $1,076 $1,703
------------------------------------------------------------
Class Y shares 264 508 876 1,911
------------------------------------------------------------
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You would pay the following expenses on the same investment if you did not sell your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------
Class X shares $ 164 $ 508 $ 876 $1,703
------------------------------------------------------------
Class Y shares 164 508 876 1,911
------------------------------------------------------------
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6 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE GOVERNMENT BOND FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks as high a level of current income as is consistent with preserving capital.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in U.S. GOVERNMENT SECURITIES and U.S. GOVERNMENT AGENCY SECURITIES. The Fund's management seeks to achieve the Fund's objective by investing in securities offering the highest level of expected income while simultaneously minimizing market price fluctuations.
In selecting investments for the Fund, the portfolio manager uses interest rate expectations, duration analysis, economic forecasting, market sector analysis and other techniques. The Fund may also look for bonds that the portfolio manager believes are undervalued, with the goal of buying them at attractive values and holding them as they increase in value. The Fund will generally maintain an average dollar-weighted MATURITY of five to nine years, and an average portfolio DURATION of four to six years.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a bond issuer may be unable to pay the interest or principal when due. This risk is more pronounced with lower rated bonds.
SELECTION RISK - the portfolio manager may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE CORE FIXED INCOME SERIES | 7
SECTION 1 GARTMORE GOVERNMENT BOND FUND SUMMARY AND PERFORMANCE (cont.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. Returns through May 11, 1998, are based on the performance of the Fund's predecessor fund. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS X SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ----------------------------------------------------------------------------------------------------------------------------------- 9.50% 7.50% -2.70% 12.00% 6.90% 10.10% 1.20% 2.65% 2.00% 2.97% |
BEST QUARTER: 5.36% -3RD QTR OF 2001
WORST QUARTER: -2.67% -2ND QTR OF 2004
After-tax returns are shown in the table for Class X shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class X shares - Before Taxes(2) -2.00% 3.41% 5.12%
--------------------------------------------------------------------------------
Class X shares - After Taxes
on Distributions(2) -3.23% 1.96% 3.29%
--------------------------------------------------------------------------------
Class X shares - After Taxes on
Distributions and Sales of Shares(2) -1.32% 2.08% 3.27%
--------------------------------------------------------------------------------
Class Y shares - Before Taxes (2) 1.98% 3.75% 5.32%
--------------------------------------------------------------------------------
Merrill Lynch Government Master Index(3) 3.48% 4.59% 5.99%
--------------------------------------------------------------------------------
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1 Total returns include the impact of any sales charges and assume
redemption of shares at the end of each period.
2 Returns through May 11, 1998 include the performance of the Fund's
predecessor Fund. For the period May 12, 1998 through March 1, 2001,
Class Y shares include the previous performance of the Fund's Class D
shares. These returns were created prior to the creation of Class X
(May 11, 1998) and Class Y (March 1, 2001). This performance is
substantially similar to what the individual classes would have
produced because these classes all invest in the same portfolio of
securities. Performance has been adjusted to reflect differences in
applicable sales charges, if any, for individual classes. Performance
has not been adjusted to reflect different expense levels, which if
reflected may have resulted in higher or lower performance for a given
share class.
3 The Merrill Lynch Government Master Index is an unmanaged index of
U.S. government bonds that gives a broad look at how those types of
bonds have performed. The Index does not pay sales charges, fees or
expenses. If sales charges, fees and expenses were deducted, the actual
returns of the Index would be lower. Individuals cannot invest directly
in an index.
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8 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE GOVERNMENT BOND FUND SUMMARY AND PERFORMANCE (cont.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select:
-------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)(1) CLASS X SHARES CLASS Y SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) None None -------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) 5.00%(2) 1.00%(3) -------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(4) 2.00% 2.00% -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.50% 0.50% -------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.85% 0.85% -------------------------------------------------------------------------------- Other Expenses 0.22% 0.22% -------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 1.57% 1.57% |
1 If you buy and sell shares through a broker or other financial
intermediary, the intermediary may charge a separate transaction fee.
2 A contingent deferred sales charge (CDSC) beginning at 5% and declining
to 1% is charged if you sell Class X shares within six years after
purchase. Class X shares convert to Class A shares after you have held
them for seven years. See Section 4, Investing with Gartmore Funds:
Choosing a Share Class -- Class X Shares.
3 A CDSC of 1% is charged if you sell Class Y shares within the first
year after purchase. See Section 4, Investing with Gartmore Funds:
Choosing a Share Class-- Class Y Shares.
4 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee
is intended to discourage frequent trading of Fund shares that can
negatively affect the Fund's performance. The fee does not apply to
shares purchased through reinvested dividends or capital gains or
shares held in certain omnibus accounts or retirement plans that cannot
implement the fee. See Section 4, Investing with Gartmore Funds:
Exchange and Redemption Fees.
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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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
------------------------------------------------------------
Class X shares $ 660 $ 796 $1,055 $1,683
------------------------------------------------------------
Class Y shares 260 496 855 1,867
------------------------------------------------------------
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You would pay the following expenses on the same investment if you did not sell your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------
Class X shares $ 160 $ 496 $ 855 $1,683
------------------------------------------------------------
Class Y shares 160 496 855 1,867
------------------------------------------------------------
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GARTMORE CORE FIXED INCOME SERIES | 9
SECTION 1 GARTMORE TAX-FREE INCOME FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks as high a level of current income that is exempt from federal income taxes as is consistent with preserving capital by investing in investment grade municipal obligations.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in INVESTMENT GRADE FIXED-INCOME SECURITIES that qualify as MUNICIPAL OBLIGATIONS. These obligations are issued by states, U.S. territories and their political subdivisions, such as counties, cities and towns. The Fund may also invest in other types of municipal obligations, including tax-exempt zero- coupon securities and floating- and variable-rate bonds, and may invest up to 20% of its net assets in municipal securities whose interest income is treated as a preference item for purposes of the federal alternative minimum tax. In selecting securities for the Fund, the Fund's management seeks value.
A security may be sold to take advantage of more favorable opportunities.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a municipal issuer may be unable to pay the interest or principal when due. This risk is more pronounced with high- yield bonds and other lower rated securities.
SELECTION RISK - the portfolio manager may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
TAX RISK - a municipal bond that is issued as tax-exempt may later be declared to be taxable. In addition, if the federal income tax rate is reduced, the value of the tax-exemption may be less valuable, causing the value of a municipal bond to decline.
If the value of the Fund's investments goes down, you may lose money.
10| GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE TAX-FREE INCOME FUND SUMMARY AND PERFORMANCE (cont.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. Returns through May 11, 1998, are based on the performance of the Fund's predecessor fund. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS X SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------------------------------------------------------------ 8.60% 5.10% -4.40% 10.50% 3.70% 7.60% 4.10% 3.56% 2.14% 2.79% |
BEST QUARTER: 4.44% -3RD QTR OF 2002
WORST QUARTER: -2.96% -2ND QTR OF 2004
After-tax returns are shown in the table for Class X shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class X shares - Before Taxes(2) -2.16% 3.67% 4.29%
--------------------------------------------------------------------------------
Class X shares - After Taxes
on Distributions(2) -2.19% 3.67% 4.27%
--------------------------------------------------------------------------------
Class X shares - After Taxes on
Distributions and Sales of Shares(2) -0.13% 3.67% 4.25%
--------------------------------------------------------------------------------
Class Y shares - Before Taxes(2) 1.71% 4.01% 4.46%
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index(3) 4.85% 5.53% 5.76%
--------------------------------------------------------------------------------
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1 Total returns include the impact of any sales charges and assume
redemption of shares at the end of each period.
2 Returns through May 11, 1998 include the performance of the Fund's
predecessor Fund. For the period May 11, 1998 through March 1, 2001,
Class Y shares include the previous performance of the Fund's Class D
shares. These returns were created prior to the creation of Class X
(May 11, 1998) and Class Y (March 1, 2001). This performance is
substantially similar to what the individual classes would have
produced because these classes all invest in the same portfolio of
securities. Performance has been adjusted to reflect differences in
applicable sales charges, if any, for individual classes. Performance
has not been adjusted to reflect different expense levels, which if
reflected may have resulted in higher or lower performance for a given
share class.
3 The Lehman Brothers Municipal Bond Index is an unmanaged index of
municipal bonds that gives a broad look at how the prices of municipal
bonds have performed. The Index does not pay sales charges, fees or
expenses. If sales charges, fees and expenses were deducted, the actual
returns of the Index would be lower. Individuals cannot invest directly
in an index.
GARTMORE CORE FIXED INCOME SERIES | 11
|
SECTION 1 GARTMORE TAX-FREE INCOME FUND SUMMARY AND PERFORMANCE (cont.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select:
-------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)(1) CLASS X SHARES CLASS Y SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) None None -------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) 5.00%(2) 1.00%(3) -------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(4) 2.00% 2.00% -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.50% 0.50% -------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.85% 0.85% -------------------------------------------------------------------------------- Other Expenses 0.20% 0.20% -------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 1.55% 1.55% -------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial
intermediary, the intermediary may charge a separate transaction fee.
2 A contingent deferred sales charge (CDSC) beginning at 5% and declining
to 1% is charged if you sell Class X shares within six years after
purchase. Class X shares convert to Class A shares after you have held
them for seven years. See Section 4, Investing with Gartmore Funds:
Choosing a Share Class -- Class X Shares.
3 A CDSC of 1% is charged if you sell Class Y shares within the first
year after purchase. See Section 4, Investing with Gartmore Funds:
Choosing a Share Class-- Class Y Shares.
4 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee
is intended to discourage frequent trading of Fund shares that can
negatively affect the Fund's performance. The fee does not apply to
shares purchased through reinvested dividends or capital gains or
shares held in certain omnibus accounts or retirement plans that cannot
implement the fee. See Section 4, Investing with Gartmore Funds:
Exchange and Redemption Fees.
|
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
------------------------------------------------------------
Class X shares $ 658 $ 790 $1,045 $1,609
------------------------------------------------------------
Class Y shares 258 490 845 1,845
------------------------------------------------------------
|
You would pay the following expenses on the same investment if you did not sell your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------
Class X shares $ 158 $ 490 $ 845 $1,609
------------------------------------------------------------
Class Y shares 158 490 845 1,845
------------------------------------------------------------
|
12 | GARTMORE CORE FIXED INCOME SERIES
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS,
INVESTMENT TECHNIQUES AND RISKS
INTEREST RATE RISK - prices of fixed-income securities generally increase when interest rates decline and decrease when interest rates increase. Prices of longer term securities generally change more in response to interest rate changes than prices of shorter term securities. To the extent a Fund invests a substantial portion of its assets in fixed-income securities with longer-term maturities, rising interest rates may cause the value of the Fund's investments to decline significantly.
CREDIT RISK - the risk that the issuer will be unable to pay the interest or principal when due. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation. Changes in an issuer's credit rating can also adversely affect the value of a Fund's investments. High-yield bonds are generally more exposed to credit risk than investment grade securities.
EVENT RISK - the risk that a corporate event such as a restructuring, merger, leveraged buyout, takeover or similar action may cause a decline in market value or credit quality of the company's bonds due to factors including an unfavorable market response or a resulting increase in the company's debt. Added debt may significantly reduce the credit quality and market value of a company's bonds.
U.S. GOVERNMENT SECURITIES AND U.S. GOVERNMENT AGENCY SECURITIES - U.S. government securities include Treasury bills, notes and bonds issued or guaranteed by the U.S. government. Because these securities are backed by the full faith and credit of the U.S. government, they present little credit risk. However, the U.S. government does not guarantee the market value of its securities and interest rate changes, prepayment rates and other factors may affect the value of U.S. government securities.
U.S. government agency securities may include obligations issued by:
o the Federal Housing Administration, the Farmers Home Administration and the Government National Mortgage Association ("GNMA"), including GNMA pass-through certificates;
o the Federal Home Loan Banks;
o the Federal National Mortgage Association ("FNMA");
o the Federal Home Loan Mortgage Corporation ("FHLMC") and
o the Federal Farm Credit Banks.
Unlike U.S. government securities, U.S. government agency securities have different levels of credit support from the government. GNMA pass-through mortgage certificates are backed by the full faith and credit of the U.S. government. While FNMA, FHLMC and the Federal Home Loan Banks are chartered by Acts of Congress, their securities are backed only by the credit of the respective instrumentality and are not issued or guaranteed by the U.S. government. Although certain government agency securities are guaranteed, market price, yield of the securities, net asset value and performance of a Fund are not guaranteed.
MORTGAGE-BACKED SECURITIES - these fixed-income securities represent the right to receive a portion of principal and/or interest payments made on a pool of residential or commercial mortgage loans. When interest rates fall, borrowers may refinance or otherwise repay principal on their loans earlier than scheduled. When this happens, certain types of mortgage-backed securities will be paid off more quickly than originally anticipated and a Fund will have to invest the proceeds in securities with lower yields. This risk is known as "prepayment risk." When interest rates rise, certain types of mortgage-backed securities will be paid off more slowly than originally anticipated and the value of these securities will fall. This risk is known as "extension risk."
Because of prepayment risk and extension risk, mortgage-backed securities react differently to changes in interest rates than other fixed-income securities. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain mortgage-backed securities.
ASSET-BACKED SECURITIES - Like traditional fixed-income securities, the value of asset-backed securities typically increases when interest rates fall and decreases when interest rates rise. Certain asset-backed securities may also be subject to the risk of prepayment. In a period of declining interest rates, borrowers may pay what they owe on the underlying assets more quickly than anticipated. Prepayment reduces the yield to maturity and the average life of the asset-backed securities. In addition, when a Fund reinvests the proceeds of a prepayment it may receive a lower interest rate. In a period of rising interest rates, prepayments may occur at a slower rate than expected. As a result, the average maturity of a Fund's portfolio may increase. The value of longer- term securities generally changes more in response to changes in interest rates than shorter-term securities.
GARTMORE CORE FIXED INCOME SERIES | 13
SECTION 2 FUND DETAILS (cont.)
HIGH-YIELD BONDS AND OTHER LOWER RATED SECURITIES - Investment in high-yield bonds and other lower rated securities involves substantial risk of loss. These securities are considered to be speculative with respect to the issuer's ability to pay interest and principal when due and are susceptible to default or decline in market value due to adverse economic and business developments. The market values of high-yield securities tend to be very volatile, and these securities are less liquid than investment-grade debt securities. Therefore, Funds that invest in high-yield bonds are subject to the following risks:
o increased price sensitivity to changing interest rates and to adverse economic and business developments;
o greater risk of loss due to default or declining credit quality;
o greater likelihood that adverse economic or company specific events will make the issuer unable to make interest and/or principal payments when due and
o negative market sentiments toward high-yield securities may depress their price and liquidity. If this occurs, it may become difficult to price or dispose of a particular security held by a Fund.
FOREIGN SECURITIES RISK - Foreign securities in which a Fund may invest may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities, the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
REPURCHASE AGREEMENTS - When entering into a repurchase agreement, the Fund essentially makes a short-term loan to a qualified bank or broker-dealer. The Fund buys securities that the seller has agreed to buy back at a specified time and at a set price that includes interest. There is a risk that the seller will be unable to buy back the securities at the time required and the Fund could experience delays in recovering amounts owed to it.
DERIVATIVES - a derivative is a contract with its value based on the performance of an underlying financial asset, index or other measure. For example, an option is a derivative because its value changes in relation to the performance of an underlying stock. The value of an option on a futures contract varies with the value of the underlying futures contract, which in turn varies with the value of the underlying commodity or security. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset to which the derivative is linked changes in unexpected ways. Some risks of investing in derivatives include:
o the other party to the derivatives contract may fail to fulfill its obligations;
o their use may reduce liquidity and make the Fund harder to value, especially in declining markets;
o the Fund may suffer disproportionately heavy losses relative to the amount invested and
o changes in the value of derivatives may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
ZERO COUPON BONDS - These securities pay no interest during the life of the security and are issued by a wide variety of governmental issuers. They often are sold at a deep discount. Zero coupon bonds may be subject to greater price changes as a result of changing interest rates than bonds that make regular interest payments; their value tends to grow more during periods of falling interest rates and, conversely, tends to fall more during periods of rising interest rates. Although not traded on a national securities exchange, zero coupon bonds are widely traded by brokers and dealers and are considered liquid. Holders of zero coupon bonds are required by federal income tax laws to pay taxes on the interest, even though such payments are not actually being made. To avoid federal income tax liability, a Fund may have to make distributions to shareholders and may have to sell some assets at inappropriate times in order to generate cash for the distributions.
FLOATING- AND VARIABLE-RATE SECURITIES - These securities do not have fixed interest rates. Instead, the rates change over time. Floating-rate securities have interest rates that vary with changes to a specific measure, such as the Treasury bill rate. Variable-rate securities have interest rates that change at preset times based on the specific measure. Some floating- and variable-rate securities may be callable by the issuer, meaning that they can be paid off before their maturity date and the proceeds may be required to be invested in lower yielding securities that reduce a Fund's income.
14 | GARTMORE CORE FIXED INCOME SERIES
SECTION 2 FUND DETAILS (cont.)
Like other fixed-income securities, floating- and variable-rate securities are subject to interest rate risk. A Fund will only purchase a floating- or variable-rate security of the same quality as the debt securities it would otherwise purchase.
SECURITIES LENDING - Each of the Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. These events could under certain circumstances trigger adverse tax consequences to a Fund.
CREDIT DEFAULT SWAP AGREEMENTS - The Gartmore Bond Fund may enter into a credit default swap, both (i) directly and (ii) indirectly in the form of a swap embedded within a structured note, to protect against the risk that a security will default. The Fund pays a fee to enter into the trade and receives a fixed payment during the life of the swap. If there is a credit event, the Fund either delivers the defaulted bond (if the Fund has taken a short position in the credit default swap) or pays the par amount of the defaulted bond (if the Fund has taken the long position in the credit default swap note). Risks of credit default swaps include the cost of paying for credit protection if there are no credit events.
PORTFOLIO TURNOVER - Each of the Funds may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
Temporary investments - each of the Funds generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances and interest-bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
GARTMORE CORE FIXED INCOME SERIES | 15
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Funds' respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
Each Fund pays the Adviser a management fee based on the Fund's average daily net assets. The total aggregate management fees paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of a Fund's average daily net assets and taking into account any applicable waivers, were as follows:
FUND ACTUAL MANAGEMENT FEE PAID -------------------------------------------------------------------------------- Gartmore Bond Fund 0.50% -------------------------------------------------------------------------------- Gartmore Government Bond Fund 0.50% -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund 0.50% |
The total annual advisory fees that can be paid to the Adviser (as a percentage of average daily net assets) are as follows:
FUND/ASSETS MANAGEMENT FEE -------------------------------------------------------------------------------- GARTMORE BOND FUND, GARTMORE GOVERNMENT BOND FUND, GARTMORE TAX-FREE INCOME FUND -------------------------------------------------------------------------------- Up to $250 million 0.50% -------------------------------------------------------------------------------- $250 million up to $1 billion 0.475% -------------------------------------------------------------------------------- $1 billion up to $2 billion 0.45% -------------------------------------------------------------------------------- $2 billion up to $5 billion 0.425% -------------------------------------------------------------------------------- $5 billion or more 0.40% -------------------------------------------------------------------------------- |
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreements for the Funds will be available in the Funds' semiannual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
PORTFOLIO MANAGEMENT
GARTMORE BOND FUND
Gary S. Davis, CFA and Mabel C. Brown, CFA, CPA are portfolio comanagers of the Gartmore Bond Fund and are responsible for the day-to-day management of the Fund, including the selection of the Fund's investments.
Mr. Davis joined Nationwide Insurance, an affiliate of the Adviser, in 1998 as a senior portfolio manager and is currently a director. He manages and co-manages with Ms. Brown, other institutional fixed-income accounts for Nationwide Insurance. Prior to joining Nationwide Insurance, he was with John Nuveen/Flagship Financial for five years.
Ms. Brown joined Nationwide Insurance, an affiliate of the Adviser, in 1998 as a senior investment analyst and is currently a director. She also co-manages with Mr. Davis, other institutional fixed- income accounts for Nationwide Insurance. Prior to joining Nationwide Insurance, she was with the Ohio Bureau of Workers' Compensation.
GARTMORE GOVERNMENT BOND FUND
Gary R. Hunt, CFA is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. Mr. Hunt has either managed or co-managed the Gartmore Government Bond Fund and its predecessor funds since March 1997. He also manages the Gartmore GVIT Government Bond Fund. He joined Nationwide Insurance, an affiliate of the Adviser, in 1992 as a securities analyst. He is currently a director and manages the U.S. Treasury, Agency and Agency Mortgage Backed sector for Nationwide Insurance.
16 | GARTMORE CORE FIXED INCOME SERIES
SECTION 3 FUND MANAGEMENT (cont.)
GARTMORE TAX-FREE INCOME FUND
Alpha Benson is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. Ms. Benson joined Nationwide Insurance, an affiliate of the Adviser, in 1977 as a financial analyst and now serves as Director of Municipal Securities. She has managed the Gartmore Tax-Free Income Fund and its predecessor since its inception in March 1986.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a nonaffiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are managed directly by the Adviser, but if a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows these Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
GARTMORE CORE FIXED INCOME SERIES | 17
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
The Gartmore Funds offer several different share classes each with different price and cost features. If you owned Class B or Class C shares on September 1, 2003, your shares were re-designated as Class X or Class Y shares, respectively on that date. This redesignation generally did not affect the operations of these two classes.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision. The table to the right outlines the differences between Class X, Class Y and Class A shares.
COMPARING CLASS X, CLASS Y AND CLASS A(1) SHARES
--------------------------------------------------------------------------------
CLASSES AND CHARGES POINTS TO CONSIDER
--------------------------------------------------------------------------------
CLASS X SHARES
CDSC up to 5.00% No front-end sales charge means your full
investment immediately goes toward buying
shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines 1% in most years to zero
after six years.
Annual service and/or Total annual operating expenses are higher
12b-1 fee of 0.85% than Class A charges which means lower
No administrative dividends per share are paid and/or net
services fee asset value ("NAV") per share.
Automatic conversion to Class A shares after
seven years, which means lower annual
expenses in the future.
Maximum investment amount of $100,000.
Larger investments may be rejected.
--------------------------------------------------------------------------------
CLASS Y SHARES
CDSC of 1.00% No front-end sales charge means your full
investment immediately goes toward buying
shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are
12b-1 fee of 0.85% higher than Class A charges which
No administrative means lower dividends and/or NAV
services fee per share.
No conversion feature.
Maximum investment amount of $1,000,000(2).
Larger investments may be rejected.
--------------------------------------------------------------------------------
CLASS A SHARES(1)
Front-end sales charge A front-end sales charge means that a
up to 4.25% portion of your initial investment goes
toward the sales charge and is not
invested. (3)
Contingent deferred Reduction and waivers of sales charges may
sales charge (CDSC)(3) be available.
Annual service and/or Total annual operating expenses are lower
12b-1 fee of 0.25% than Class B and Class C charges which means
Administrative services higher dividends and/or NAV per share.
fee up to 0.25%
No conversion feature.
No maximum investment amount.
|
1 Class A shares are included because Class X shares will convert to
Class A shares after seven years.
2 This limit was calculated based on a one-year holding period.
3 A CDSC of up to 0.75% will be charged on Class A shares redeemed within
18 months of purchase if you paid no sales charge on the original
purchase and for which a finders fee was paid.
|
18 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
------------------------------------------------------------------------
Less than $100,000 4.25% 4.44% 3.75%
------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
------------------------------------------------------------------------
$1 million or more None None None*
|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include accounts statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (as shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge,. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchase of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
GARTMORE CORE FIXED INCOME SERIES | 19
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
WAIVER OF CLASS A SALES CHARGES
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that
has an agreement with Gartmore Distribution Services, Inc. (the
"Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and
their employees and investment advisory clients of a broker- dealer
that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore
Fund Class D shares if the new Fund does not offer Class D shares and
Class A shares are purchased instead;
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust
and their affiliates and
o directors, officers, full-time employees (and their spouses, children
or immediate relatives) of sponsor groups that may be affiliated with
the Nationwide Insurance and Nationwide Financial companies from time
to time.
Purchases of $1 million or more of Class A shares have no front- end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 0.75% applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge
for another reason;
o a finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains
distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES
AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 0.75% 0.50% 0.25% |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay.
o the redemption of Class A, Class X or Class Y shares purchased through reinvested dividends or distributions;
o Class X shares which are qualifying redemptions of Class X shares under the Automatic Withdrawal Program;
o Class X or Class Y shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class X and Class Y shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class Y shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class X or Class Y shares, and you then reinvest the proceeds in Class X or Class Y shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
If you qualify for a waiver of a CDSC, you must notify Customer Service, your financial adviser or intermediary at the time of purchase and must also provide any required evidence showing that you qualify. For more complete information, see the SAI.
CLASS X SHARES
Class X shares may be appropriate if you do not want to pay a front-end sales charge and anticipate holding our shares for longer than six years.
If you redeem Class X shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
7 years
Sale within 1 year 2 years 3 years 4 years 5 years 6 years or more
---------------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
|
20| GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
CONVERSION OF CLASS X SHARES
After you hold your Class X shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class X shares, you may receive fewer Class A shares than the Class X shares converted; however, the total dollar value is the same.
CLASS Y SHARES
Both the front-end sales charge and CDSC applicable to Class Y shares will be waived for redemptions of retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept
or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment
Company Act of 1940, which permits Class A, Class X and Class Y shares of the
Funds to compensate the Distributor for expenses associated with distributing
and selling shares and providing shareholder services through distribution
and/or shareholder servicing fees. These fees are paid to the distributor are
either kept or paid to your financial adviser or other intermediary for
distribution and shareholder services.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class X and Class Y shares pay the Distributor annual amounts not exceeding the following:
CLASS AS A % OF DAILY NET ASSETS -------------------------------------------------------------------------------- Class A shares 0.25% (distribution or service fee) -------------------------------------------------------------------------------- Class X shares 0.85% (0.10% service fee) -------------------------------------------------------------------------------- Class Y shares 0.85% (0.10% service fee) |
ADMINISTRATIVE SERVICES FEES
Class X and Class Y shares do not pay administrative services fees.
Class A shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A shares as described above.) These fees are paid by the Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
GARTMORE CORE FIXED INCOME SERIES | 21
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase
shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
Internet Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
22 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
FUND TRANSACTIONS--CLASS A, CLASS X AND CLASS Y SHARES
All transaction orders must be received by the Funds' transfer agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON 60
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND DAYS WRITTEN NOTICE TO SHAREHOLDERS.
THE OFFERING OF SHARES AT ANY TIME. **A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLIONSIGNATURE GUARANTEE" BELOW.
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THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase,exchange intermediaries who are authorized to accept purchase, exchange
and redemption orders for the Funds. Your transaction is and redemption orders for the Funds. Your transaction is
processed at the NAV next calculated after the Funds' agent processed at the NAV next calculated after the Funds' agent or
or an authorized intermediary receives your order in proper form. an authorized intermediary receives your order in proper form.
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BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. mailing or faxing a letter to Gartmore Funds. The letter must
dollars and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT CASH, include your account number(s) and the name(s) of the Fund(s)
STARTER CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, CREDIT you wish to exchange from and to. The letter must be signed by
CARD CHECKS OR MONEY ORDERS. all account owners. We reserve the right to request original
documents for any faxed requests.
BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The Funds unless you decline this option on your application. The Funds
follow procedures to confirm that telephone instructions are follow procedures to confirm that telephone instructions are
genuine and will not be liable for any loss, injury, damage or genuine and will not be liable for any loss, injury, damage or
expense that results from executing such instructions. The expense that results from executing such instructions. The
Funds may revoke telephone privileges at any time, without Funds may revoke telephone privileges at any time, without
notice to shareholders. notice to shareholders. For redemptions, shareholders who own
shares in an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed to the
address of record.
The Funds may record telephone instructions to redeem shares
and may request redemption instructions in writing, signed by
all shareholders on the account.
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ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line website. However, the Funds may discontinue on-line
transactions of Fund shares at any time. transactions of Fund shares at any time.
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BY BANK WIRE. You may have your bank transmit funds by federal BY BANK WIRE. The Funds can wire the proceeds of your sale
funds wire to the Funds' custodian bank. (The authorization directly to your account at a commercial bank. A voided check
will be in effect unless you give the Funds written notice of must be attached to your application. (The authorization will
its termination.) be in effect unless you give the Fund written notice of its
termination.)
o if you choose this method to open a new account, you must
call our toll-free number before you wire your investment and o your proceeds typically will be wired to your bank on the
arrange to fax your completed application. next business day after your order has been processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the sale
o The wire must be received by 4:00 p.m. in order to receive proceeds for this service.
the current day's NAV. o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund your Gartmore BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds
Funds' account with proceeds from your bank via ACH on the can be sent to your bank via ACH on the second business day
second business day after your purchase order has been after your order has been processed. A voided check must be
processed. A voided check must be attached to your attached to your application. Money sent through ACH should
application. Money sent through ACH typically reaches Gartmore reach your bank in two business days. There is no fee for this
Funds from your bank in two business days. There is no fee for service. (The authorization will be in effect unless you give
this service. (The authorization will be in effect unless you the Funds written notice of its termination.)
give the Funds written notice of its termination.)
ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans or plan administrator regarding transactions. Retirement plans or
their administrators wishing to conduct transactions should their administrators wishing to conduct transactions should
call our toll-free number. Eligible entities or individuals call our toll-free number. Eligible entities or individuals
wishing to conduct transactions in number. Eligible entities wishing to conduct transactions in number. Eligible entities
or individuals wishing to conduct transactions in or individuals wishing to conduct transactions in
Institutional Service Class or Institutional Class shares Institutional Service Class or Institutional Class shares
should call our toll-free number. should call our toll-free number.
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|
GARTMORE CORE FIXED INCOME SERIES | 23
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by the Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of the last quoted bid price. Where such bid prices are either unavailable or are deemed by the Advisers to be unreliable, a Fair Valuation Committee, consisting of employees of the Advisers, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
CLASS X AND CLASS Y SHARES
Additional investments $100 (per Fund)
Additional Investments
(Automatic Asset Accumulation Plan) $50
Minimum investment requirements do not apply to certain retirement plans, fee-based programs or omnibus accounts. If you purchase shares through an intermediary, different minimum account requirements may apply. The Distributor reserves the right to waive the investment minimums under certain circumstances.
24 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker- dealer or other financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o Name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross- referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Fund(s) and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
Exchanging Shares
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration and
o your first purchase in the new fund meets its minimum investment requirement.
Subject to the conditions above, Class X and Class Y shareholders may exchange their shares for Class B and Class C shares, respectively, of any Gartmore Fund. You may also exchange Class X and Class Y shares into the Prime Shares of the Gartmore Money Market Fund. However, if you exchange your Class X or Class Y shares, you will not be permitted to exchange back into Class X or Class Y shares of the original Fund. In addition, you may not exchange Class X or Class Y shares of a Fund into Class X or Class Y shares of any other Fund. The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically may redeem shares in Class A, Class X and Class Y in a minimum amount of $50 or more. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A shares subject to a sales charge while redeeming shares using this program. If you own Class X shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class X shares is located in the SAI.
GARTMORE CORE FIXED INCOME SERIES | 25
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
SELLING SHARES
You can sell, or in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fees) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
IF YOU REDEEM ALL OF YOUR CLASS X OR CLASS Y SHARES OF A FUND, YOU WILL NOT BE ABLE TO BUY CLASS X OR CLASS Y SHARES, RESPECTIVELY, OF THAT FUND IN THE FUTURE.
You may not be able to redeem your Fund shares or Gartmore Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Fund different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
A medallion signature guarantee is required for redemptions of shares of the Funds in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
26 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or sales and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Funds based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high- yield bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) base on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser, its subadvisers and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund also has implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through certain intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
GARTMORE CORE FIXED INCOME SERIES | 27
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a Fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent sale must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70-1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with the Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or sale within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund with the exchange for less than the minimum holding period listed below:
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
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Gartmore China Opportunities Fund 2.00% 90
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Gartmore Emerging Markets Fund 2.00% 90
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Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
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Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and
Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
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Gartmore Hedged Core Equity Fund 2.00% 90
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Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
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Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
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Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
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Gartmore Growth Fund 2.00% 30
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Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
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Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
|
28 | GARTMORE CORE FIXED INCOME SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends monthly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gain distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, a Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
GARTMORE TAX-FREE INCOME FUND
Most distributions from the Tax-Free Income Fund will consist of exempt-interest dividends (dividends paid from interest earned on municipal securities). In general, these dividends are exempt from regular federal income tax. Any taxable distributions will be reported on Form 1099-DIV. Exempt-interest dividends from interest earned on municipal securities of a state or its political subdivisions, generally are also exempt from that state's personal income tax. Income from municipal securities of other states generally does not qualify as tax-free. Because of these tax exemptions, a tax-free fund may not be a suitable investment for retirement plans and other tax-exempt investors. Corporate shareholders should note that exempt-interest dividends may be fully taxable in states that impose corporate franchise taxes, and they should consult with their tax advisers about the taxability of this income before investing in the Funds. Exempt-interest dividends are taken into account when determining the taxable portion of your Social Security or railroad retirement benefits. Each Fund may invest a portion of its assets in private activity bonds. The income from these bonds is a tax preference item when determining your federal alternative minimum tax.
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
GARTMORE CORE FIXED INCOME SERIES | 29
SECTION 5 DISTRIBUTIONS AND TAXES (cont.)
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax and are subject to special U.S. tax certification requirements.
TAX STATUS FOR RETIREMENT PLANS AND
OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gain distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
30| GARTMORE CORE FIXED INCOME SERIES
SECTION 6 GARTMORE BOND FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31. Certain information reflects financialresults for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of alldividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are includedin the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------
NET
REALIZED
AND
NET ASSET UNREALIZED
VALUE NET GAINS TOTAL FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS ACTIVITIES
-------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 $9.58 0.45 (0.15) 0.30
Year Ended October 31, 2003(d) $9.43 0.41 0.24 0.65
Year Ended October 31, 2004 $9.67 0.38 0.08 0.46
Year Ended October 31, 2005 $9.75 0.35 (0.21) 0.14
Year Ended October 31, 2006 $9.54 0.40 0.02 0.42
------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 $9.59 0.45 (0.15) 0.30
Year Ended October 31, 2003(d) $9.44 0.41 0.24 0.65
Year Ended October 31, 2004 $9.68 0.38 0.08 0.46
Year Ended October 31, 2005 $9.76 0.35 (0.21) 0.14
Year Ended October 31, 2006 $9.55 0.40 0.02 0.42
--------------------------------------------------------------------------------
----------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN(a)
----------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 (0.45) (0.45) $9.43 3.26%
Year Ended October 31, 2003(d) (0.41) (0.41) $9.67 6.98%
Year Ended October 31, 2004 (0.38) (0.38) $9.75 4.82%
Year Ended October 31, 2005 (0.35) (0.35) $9.54 1.44%
Year Ended October 31, 2006 (0.38) (0.38) $9.58 4.57%
----------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 (0.45) (0.45) $9.44 3.26%
Year Ended October 31, 2003(d) (0.41) (0.41) $9.68 6.97%
Year Ended October 31, 2004 (0.38) (0.38) $9.76 4.81%
Year Ended October 31, 2005 (0.35) (0.35) $9.55 1.44%
Year Ended October 31, 2006 (0.38) (0.38) $9.59 4.56%
----------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------
RATIO OF
RATIO OF INVESTMENT
RATIO EXPENSES INCOME
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
---------------------------------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 $3,548 1.62% 4.79% (e) (e) 27.66%
Year Ended October 31, 2003(d) $3,674 1.60% 4.22% (e) (e) 17.73%
Year Ended October 31, 2004 $3,457 1.57% 3.85% (e) (e) 17.20%
Year Ended October 31, 2005 $2,821 1.63% 3.62% (e) (e) 34.08%
Year Ended October 31, 2006 $1,854 1.61% 4.18% 1.61% 4.18% 36.06%
CLASS Y SHARES
Year Ended October 31, 2002 $ 272 1.62% 4.78% (e) (e) 27.66%
Year Ended October 31, 2003(d) $ 256 1.60% 4.21% (e) (e) 17.73%
Year Ended October 31, 2004 $ 238 1.57% 3.85% (e) (e) 17.20%
Year Ended October 31, 2005 $ 199 1.63% 3.62% (e) (e) 34.08%
Year Ended October 31, 2006 $ 151 1.60% 4.18% 1.60% 4.18% 36.06%
|
(a) Excludes sales charges.
(b) During the period certain fees were waived and /or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Porfolio turnover is calculated on the basis of the Fund as a whole without distinguising among the classes of shares.
(d) Effective September 1, 2003, Class B and Class C were renamed Class X and Class Y respectively.
(e) There were no fee reductions during the period.
GARTMORE CORE FIXED INCOME SERIES | 31
SECTION 6 GARTMORE GOVERNMENT BOND FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------
NET
REALIZED
AND
NET ASSET UNREALIZED
VALUE NET GAINS TOTAL FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 $10.94 0.40 0.19 0.59
Year Ended October 31, 2003(d) $10.93 0.36 (0.14) 0.22
Year Ended October 31, 2004 $10.61 0.30 0.02 0.32
Year Ended October 31, 2005 $10.36 0.30 (0.20) 0.10
Year Ended October 31, 2006 $10.16 0.36 0.02 0.38
--------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 $10.94 0.40 0.19 0.59
Year Ended October 31, 2003(d) $10.93 0.36 (0.14) 0.22
Year Ended October 31, 2004 $10.61 0.30 0.02 0.32
Year Ended October 31, 2005 $10.36 0.30 (0.20) 0.10
Year Ended October 31, 2006 $10.16 0.36 0.02 0.38
--------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN(a)
---------------------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 (0.40) (0.20) (0.60) $10.93 5.80%
Year Ended October 31, 2003(d) (0.35) (0.19) (0.54) $10.61 2.00%
Year Ended October 31, 2004 (0.31) (0.26) (0.57) $10.36 3.10%
Year Ended October 31, 2005 (0.30) -- (0.30) $10.16 1.00%
Year Ended October 31, 2006 (0.35) (0.01) (0.36) $10.18 3.77%
---------------------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 (0.40) (0.20) (0.60) $10.93 5.80%
Year Ended October 31, 2003(d) (0.35) (0.19) (0.54) $10.61 2.00%
Year Ended October 31, 2004 (0.31) (0.26) (0.57) $10.36 3.10%
Year Ended October 31, 2005 (0.30) -- (0.30) $10.16 1.00%
Year Ended October 31, 2006 (0.35) (0.01) (0.36) $10.18 3.77%
---------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------
RATIO OF
RATIO OF INVESTMENT
RATIO EXPENSES INCOME
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 $6,067 1.58% 3.74% 1.58% 3.74% 99.42%
Year Ended October 31, 2003(d) $5,689 1.57% 3.29% (e) (e) 106.65%
Year Ended October 31, 2004 $4,557 1.54% 2.91% (e) (e) 110.72%
Year Ended October 31, 2005 $3,394 1.56% 2.95% (e) (e) 117.67%
Year Ended October 31, 2006 $1,907 1.56% 3.44% 1.56% 3.44% 150.10%
----------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 $ 941 1.58% 3.72% 1.58% 3.72% 99.42%
Year Ended October 31, 2003(d) $1,910 1.57% 3.28% (e) (e) 106.65%
Year Ended October 31, 2004 $ 961 1.54% 2.93% (e) (e) 110.72%
Year Ended October 31, 2005 $ 855 1.56% 2.95% (e) (e) 117.67%
Year Ended October 31, 2006 $ 830 1.55% 3.49% 1.55% 3.49% 150.10%
----------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) Effective September 1, 2003, Class B and Class C shares were renamed Class X and Class Y shares respectively.
(e) There were no fee reductions during the period.
32 | GARTMORE CORE FIXED INCOME SERIES
SECTION 6 GARTMORE TAX-FREE INCOME FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------
NET
REALIZED
AND
NET ASSET UNREALIZED
VALUE NET GAINS TOTAL FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 $10.50 0.40 0.01 0.41
Year Ended October 31, 2003(c) $10.51 0.38 (0.02) 0.36
Year Ended October 31, 2004 $10.49 0.37 0.18 0.55
Year Ended October 31, 2005 $10.67 0.32 (0.19) 0.13
Year Ended October 31, 2006 $10.48 0.37 0.02 0.39
--------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 $10.48 0.41 -- 0.41
Year Ended October 31, 2003(c) $10.49 0.39 (0.03) 0.36
Year Ended October 31, 2004 $10.47 0.38 0.17 0.55
Year Ended October 31, 2005 $10.65 0.32 (0.18) 0.14
Year Ended October 31, 2006 $10.46 0.36 0.02 9.38
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DISTRIBUTIONS
-------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN(a)
--------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 (0.40) (0.40) $10.51 4.05%
Year Ended October 31, 2003(c) (0.38) (0.38) $10.49 3.48%
Year Ended October 31, 2004 (0.37) (0.37) $10.67 5.34%
Year Ended October 31, 2005 (0.32) (0.32) $10.48 1.36%
Year Ended October 31, 2006 (0.37) (0.37) $10.50 3.68%
--------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 (0.40) (0.40) $10.49 4.06%
Year Ended October 31, 2003(c) (0.38) (0.38) $10.47 3.49%
Year Ended October 31, 2004 (0.37) (0.37) $10.65 5.35%
Year Ended October 31, 2005 (0.33) (0.33) $10.46 1.37%
Year Ended October 31, 2006 (0.37) (0.37) $10.47 3.59%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------
RATIO
OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE PORTFOLIO
(000S) NET ASSETS NET ASSETS TURNOVER (b)
--------------------------------------------------------------------------------
CLASS X SHARES
Year Ended October 31, 2002 $6,445 1.58% 3.88% 27.77%
Year Ended October 31, 2003(c) $6,861 1.57% 3.61% 16.91%
Year Ended October 31, 2004 $6,342 1.53% 3.50% 0.00%
Year Ended October 31, 2005 $4,903 1.57% 3.06% 3.70%
Year Ended October 31, 2006 $3,167 1.55% 3.52% 1.91%
-------------------------------------------------------------------------------
CLASS Y SHARES
Year Ended October 31, 2002 $ 221 1.59% 3.87% 27.77%
Year Ended October 31, 2003(c) $ 652 1.57% 3.61% 16.91%
Year Ended October 31, 2004 $ 493 1.54% 3.51% 0.00%
Year Ended October 31, 2005 $ 232 1.58% 3.05% 3.70%
Year Ended October 31, 2006 $ 135 1.55% 3.53% 1.91%
|
(a) Excludes sales charge.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(c) Effective September 1, 2003, Class B and Class C shares were renamed Class X and (c) Class Y shares, respectively.
GARTMORE CORE FIXED INCOME SERIES | 33
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance during its last fiscal year)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920 or write to us at the address listed below, to request (1) additional copies free of charge or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. -9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for closing share prices. Also, visit the Gartmore Funds' website at www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE
COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov,
o by electronic request to publicinfo@sec.gov.
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 205490102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-CFX-XY 2/07
CORE FIXED INCOME Series
Gartmore Bond Fund
Gartmore Enhanced Income Fund
Gartmore Government Bond Fund
Gartmore Money Market Fund
Gartmore Short Duration Bond Fund
Gartmore Tax-Free Income Fund
[LOGO] GARTMORE FUNDS
Fund PROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
CORE FIXED INCOME Series
Fixed-income funds designed to form the foundation of an asset allocation program.
FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore Bond Fund Class A NBDAX -------------------------------------------------------------------------------- Gartmore Bond Fund Class B GBDBX -------------------------------------------------------------------------------- Gartmore Bond Fund Class C GBDCX -------------------------------------------------------------------------------- Gartmore Bond Fund Class D MUIBX -------------------------------------------------------------------------------- Gartmore Bond Fund Class R GBDRX -------------------------------------------------------------------------------- Gartmore Bond Fund Institutional Class GBDIX -------------------------------------------------------------------------------- Gartmore Enhanced Income Fund Class A NMEAX -------------------------------------------------------------------------------- Gartmore Enhanced Income Fund Class R GMERX -------------------------------------------------------------------------------- Gartmore Enhanced Income Fund Institutional Class NMEIX -------------------------------------------------------------------------------- Gartmore Enhanced Income Fund Institutional Service Class NMESX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Class A NUSAX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Class B GGBBX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Class C GGBCX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Class D NAUGX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Class R GGBRX -------------------------------------------------------------------------------- Gartmore Government Bond Fund Institutional Class GGBIX -------------------------------------------------------------------------------- Gartmore Money Market Fund Prime Shares MIFXX -------------------------------------------------------------------------------- Gartmore Money Market Fund Institutional Class GMIXX -------------------------------------------------------------------------------- Gartmore Money Market Fund Service Class NWSXX -------------------------------------------------------------------------------- Gartmore Short Duration Bond Fund Class A MCAPX -------------------------------------------------------------------------------- Gartmore Short Duration Bond Fund Class C GGMCX -------------------------------------------------------------------------------- Gartmore Short Duration Bond Fund IRA Class NMIRX -------------------------------------------------------------------------------- Gartmore Short Duration Bond Fund Institutional Class MCAIX -------------------------------------------------------------------------------- Gartmore Short Duration Bond Fund Service Class MCAFX -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund Class A NTFAX -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund Class B GTIBX -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund Class C GTICX -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund Class D NATFX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND PERFORMANCE
Gartmore Bond Fund
Gartmore Enhanced Income Fund
Gartmore Government Bond Fund
Gartmore Money Market Fund
Gartmore Short Duration Bond Fund
Gartmore Tax-Free Income Fund
27 SECTION 2: FUND DETAILS
Additional Information about Investments, Investment Techniques and
Risks
30 SECTION 3: FUND MANAGEMENT
Investment Advisers
Portfolio Management
Multi-Manager Structure
32 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
45 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other Tax-Deferred Accounts
Backup Withholding
47 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE CORE FIXED INCOME SERIES | 1
CORE FIXED INCOME Series
INTRODUCTION TO THE CORE FIXED INCOME SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT SIX FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
Gartmore Bond Fund
Gartmore Enhanced Income Fund
Gartmore Government Bond Fund
Gartmore Money Market Fund
Gartmore Short Duration Bond Fund
Gartmore Tax-Free Income Fund
THESE FUNDS ARE PRIMARILY INTENDED:
o to help investors seek current income through investments in various government, corporate and short-term debt securities.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
o Gartmore Bond Fund and Gartmore Government Bond Fund offer eight share classes. Six of those classes are offered in this prospectus: Class A, Class B, Class C, Class D, Class R and Institutional Class.
o Gartmore Tax-Free Income Fund offers six share classes. Four of those classes are offered in this prospectus: Class A, Class B, Class C and Class D.
The Gartmore Bond Fund, Gartmore Government Bond Fund and Gartmore Tax-Free Income Fund also have Class X and Class Y shares which are offered in a separate prospectus and are available only to certain shareholders. If you owned Class X or Class Y shares of any of these Funds as of September 1, 2003, you may continue to purchase them and should refer to the separate prospectus for more information.
o Gartmore Enhanced Income Fund offers four share classes: Class A, Class R, Institutional Service Class and Institutional Class.
o Gartmore Money Market Fund offers three share classes: Service Class, Institutional Class and Prime Shares.
o Gartmore Short Duration Bond Fund offers four classes of shares: Class A, Class C, Service Class and Institutional Class.
IRA Class shares of the Gartmore Short Duration Bond Fund are closed to new investors, including any exchanges from other Gartmore mutual funds. Existing shareholders are permitted to continue to invest in the Fund both directly and through exchanges from other Gartmore Funds, as well as through dividend and capital gains reinvestments. The Fund will continue to monitor the cash flows from existing shareholders and may close the Fund to all further investments by existing shareholders at some point.
An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Each Fund may employ a "multi-manager" structure, which means that each Fund's
investment adviser may hire, replace or terminate one or more subadvisers not
affiliated with it for a Fund without shareholder approval. Each investment
adviser believes that this structure gives it increased flexibility to manage
the Funds in your best interests and to operate the Funds more efficiently. See
Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies and marketing materials related to them will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE CORE FIXED INCOME SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
ASSET-BACKED SECURITIES - fixed-income securities issued by a trust or other legal entity established for the purpose of issuing securities and holding certain assets, such as credit card receivables or auto leases, that pay down over time and generate sufficient cash to pay holders of the securities.
COMMERCIAL PAPER - short-term debt instruments, usually unsecured, that are issued by banks and corporations in order to finance their short-term credit needs, such as accounts receivable or inventory, and that are acquired at either a discount or are interest bearing.
CORPORATE BONDS - debt securities issued by corporate issuers, as distinct from fixed-income securities issued by a government or its agencies or instrumentalities.
DERIVATIVE - a contract the value of which is based on the performance of an underlying financial asset, index or economic measure.
DURATION - related in part to the remaining time until maturity of a bond, duration is a measure of how much the price of a bond would change compared to a change in market interest rates. A bond's value drops when interest rates rise, and vice versa. Bonds with longer durations have higher risk and volatility.
FIXED-INCOME SECURITIES - securities, including bonds and other debt securities, that represent an obligation by the issuer to pay a specified rate of interest or dividend at specified times.
HIGH-YIELD BONDS - fixed-income securities rated below investment grade by nationally recognized statistical rating organizations, including Moody's, Standard & Poor's and Fitch or unrated securities that Fund management believes are of comparable quality. These bonds are often referred to as "junk bonds". They generally offer investors higher interest rates as a way to help compensate for the fact that the issuer is at greater risk of default.
INVESTMENT GRADE - the four highest rating categories of nationally recognized statistical rating organizations, including Moody's, Standard & Poor's and Fitch.
MATURITY - the time at which the principal amount of a bond is scheduled to be returned to investors.
MORTGAGE-BACKED SECURITIES - fixed-income securities that give the holder the right to receive a portion of principal and/or interest payments made on a pool of residential or commercial mortgage loans, which in some cases are guaranteed by government agencies.
MUNICIPAL OBLIGATIONS - fixed-income securities issued by, or on behalf of, states, cities and other local governmental entities, to pay for construction and other projects. They are loans that investors make to a governmental entity; the governmental entity gets the cash it needs to complete its project and the lenders earn interest payments and get their principal back. Municipal obligations that qualify pay interest that is generally exempt from federal income taxes, although certain investors may nonetheless be subject to federal alternative minimum tax.
TOTAL RETURN - investment return that reflects both capital appreciation or depreciation (increase or decrease in the market value of a security) and income (I.E., interest or dividends).
U.S. GOVERNMENT AGENCY SECURITIES - debt securities issued and/or guaranteed as to principal and interest by U.S. government agencies, U.S. government-sponsored enterprises and U.S. government instrumentalities that are not direct obligations of the United States. Such securities may not be supported by the full faith and credit of the United States.
U.S. GOVERNMENT SECURITIES - debt securities issued and/or guaranteed as to principal and interest by the U.S. government that are supported by the full faith and credit of the United States.
GARTMORE CORE FIXED INCOME SERIES | 3
SECTION 1 GARTMORE BOND FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks as high a level of current income as is consistent with preserving capital.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in FIXED-INCOME SECURITIES that are INVESTMENT GRADE, including CORPORATE BONDS, U.S. GOVERNMENT SECURITIES and U.S. GOVERNMENT AGENCY SECURITIES. The Fund seeks to achieve its objective by investing in securities offering the highest level of expected income while simultaneously minimizing market price fluctuations.
The Fund may also invest a portion of its assets in:
o MORTGAGE-BACKED SECURITIES;
o ASSET-BACKED SECURITIES;
o foreign government and corporate bonds denominated in U.S. dollars;
o COMMERCIAL PAPER rated by a rating agency in one of the two highest rating categories;
o HIGH-YIELD BONDS and
o DERIVATIVES.
In selecting securities, the Fund's management typically maintains an average portfolio DURATION of three to seven years.
The Fund's management seeks value and may sell a security to take advantage of more favorable opportunities. The Fund also may sell a bond as it gets closer to its MATURITY in order to maintain the Fund's target duration and achieve an attractive TOTAL RETURN.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a bond issuer may be unable to pay the interest or principal when due. This risk is more pronounced with high-yield bonds and other lower rated securities.
SELECTION RISK - the portfolio managers may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
LOWER RATED SECURITIES RISK - refers to the risk that the Fund's investment in high-yield bonds and other lower rated bonds will subject the Fund to substantial risk of loss.
EVENT RISK - the risk that corporate issuers may undergo restructurings, such as mergers, leveraged buyouts, takeovers or similar events, which may be financed by increased debt. As a result of the added debt, the credit quality and the market value of a company's bonds may decline significantly.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE BOND FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. Returns through May 11, 1998, are based on the performance of the Fund's predecessor fund. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS D SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 --------------------------------------------------------------------- 9.30% 8.40% -2.80% 7.40% 9.80% 9.30% 6.40% 4.83% 3.13% 4.40% |
BEST QUARTER: 5.17% - 3RD QTR OF 2002
WORST QUARTER: -2.80% - 2ND QTR OF 2004
After-tax returns are shown in the table for Class D shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A shares - Before Taxes(2) -0.25% 4.41% 5.27%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(2) -1.44% 4.32% 5.16%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 2.54% 4.64% 5.37%
--------------------------------------------------------------------------------
Class D shares - Before Taxes -0.27% 4.61% 5.46%
--------------------------------------------------------------------------------
Class D shares - After Taxes on Distributions -1.98% 2.80% 3.29%
--------------------------------------------------------------------------------
Class D shares - After Taxes on
Distributions and Sales of Shares -0.21% 2.85% 3.30%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 3.92% 5.24% 5.78%
--------------------------------------------------------------------------------
Institutional Class shares - Before Taxes(2) 4.40% 5.58% 5.95%
--------------------------------------------------------------------------------
Lehman Brothers Government/Credit
Bond Index(4) 3.80% 5.17% 6.26%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns prior to the introduction of specific classes are based on both the previous performance of various classes of the predecessor fund and, after May 11, 1998, on the performance of various classes of the Fund as noted below. This performance is substantially similar to what the individual classes would have produced because all classes invest in the same portfolio of securities. Performance has been adjusted to reflect differences in applicable sales charges, if any, for individual classes. Performance has not been adjusted to reflect different expense levels, which if reflected may have resulted in higher or lower performance for a given share class.
Class A (introduced May 11, 1998): Performance is based on the predecessor fund.
Class B (introduced September 4, 2003): Performance is based on the predecessor fund through May 11, 1998 and the Fund's Class X from May 12, 1998, through September 4, 2003.
Class C (introduced September 4, 2003): Performance is based on the predecessor fund through May 11, 1998, the Fund's Class D from May 12, 1998, through March 1, 2001 and the Fund's Class Y from March 1, 2001 through September 4, 2003.
Class R (introduced October 1, 2003): Performance is based on the predecessor fund through May 11, 1998 and the Fund's Class D from May 12, 1998, through October 1, 2003.
Institutional Class (introduced June 29, 2004): Performance is based on the predecessor fund through May 11, 1998 and the Fund's Class D from May 12, 1998, through June 29, 2004.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 The Lehman Brothers Government/Credit Bond Index is an unmanaged index of U.S. government and investment-grade corporate bonds with at least one year to maturity. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE FIXED INCOME SERIES | 5
SECTION 1 GARTMORE BOND FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
------------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES (PAID DIRECTLY INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES CLASS R SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchase (as a percentage of offering price) 4.25%(2) None None 4.50%(2) None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% None 0.50% None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 0.33% 0.26% 0.26% 0.30% 0.46% 0.26% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 1.08% 1.76% 1.76% 0.80% 1.46% 0.76% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of $100,000 or more of Class A and $50,000 or more of Class D shares is reduced or eliminated. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.75% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class D and Class R shares. For the year ended October 31, 2006, administrative services fees for Class A, Class D and Class R shares were 0.07%, 0.04% and 0.20%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
6 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE BOND FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 530 $ 754 $ 995 $ 1,686
--------------------------------------------------------------------------------
Class B shares 679 854 1,154 1,810
--------------------------------------------------------------------------------
Class C shares 279 554 954 2,073
--------------------------------------------------------------------------------
Class D shares 528 694 874 1,395
--------------------------------------------------------------------------------
Class R shares 149 462 797 1,746
--------------------------------------------------------------------------------
Institutional Class shares 78 243 422 942
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 179 $ 554 $ 954 $ 1,810
--------------------------------------------------------------------------------
Class C shares 179 554 954 2,073
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class D, Class R and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE CORE FIXED INCOME SERIES | 7
SECTION 1 GARTMORE ENHANCED INCOME FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks a high level of current income while preserving capital and minimizing fluctuations in share value.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests primarily in high-grade CORPORATE BONDS, U.S. GOVERNMENT SECURITIES and U.S. GOVERNMENT AGENCY SECURITIES. The Fund also may purchase MORTGAGE-BACKED SECURITIES and ASSET-BACKED SECURITIES, and may invest in FIXED-INCOME SECURITIES that pay interest on either a fixed-rate or variable-rate basis.
In choosing securities for the Fund, the portfolio managers attempt to identify securities that, in their opinion, offer the best combination of yield, MATURITY and relative price performance, based on anticipated changes in interest rates and in the price relationships among various types of fixed-income securities. The portfolio managers may sell securities in order to buy others that they believe will better serve the objectives of the Fund.
The Fund is managed so that its DURATION will be between six months and one year, and will not exceed two years, and the Fund may enter into certain DERIVATIVES contracts, such as futures or options, solely for the purpose of adjusting the Fund's duration in order to minimize fluctuation of the Fund's share value.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a bond issuer may be unable to pay the interest or principal when due. This risk is more pronounced with high-yield bonds and other lower rated securities.
SELECTION RISK - the portfolio managers may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
EVENT RISK - the risk that corporate issuers may undergo restructurings, such as mergers, leveraged buyouts, takeovers or similar events, which may be financed by increased debt. As a result of the added debt, the credit quality and the market value of a company's bonds may decline significantly.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
If the value of the Fund's investments goes down, you may lose money.
8 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE ENHANCED INCOME FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2000 2001 2002 2003 2004 2005 2006 --------------------------------------------------- 4.80% 2.50% 2.20% 0.90% 0.49% 2.17% 4.31% |
BEST QUARTER: 1.59% - 3RD QTR OF 2000
WORST QUARTER: -0.36% - 2ND QTR OF 2004
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (DEC. 29, 1999)
---------------------------------------------------------------------------------------
Class A shares - Before Taxes 1.61% 1.56% 2.14%
---------------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 0.31% 0.45% 0.73%
---------------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions and
Sales of Shares 1.03% 0.67% 0.96%
---------------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 4.11% 1.96% 2.42%
---------------------------------------------------------------------------------------
Institutional Service Class shares - Before Taxes 4.21% 2.10% 2.58%
---------------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 4.58% 2.35% 2.84%
---------------------------------------------------------------------------------------
ML 6-Month T-Bill Index(3) 4.81% 2.52% 3.46%
---------------------------------------------------------------------------------------
ML 1-Year T-Bill Index(3) 4.32% 2.43% 3.61%
---------------------------------------------------------------------------------------
Composite Index(3) 4.56% 2.48% 3.43%
---------------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns before the first offering of Class R shares (10/1/03) are based on the previous performance of Class A shares. This performance is substantially similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. Returns for Class R have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
3 The Composite Index comprises 50% Merrill Lynch (ML) 6-Month Treasury Bill (T-Bill) Index/50% Merrill Lynch 1-Year Treasury Bill Index. The ML 6-Month T-Bill Index comprises a single issue purchased at the beginning of a month and held for a full month. At the end of that month, that issue is sold and rolled into a newly selected issue. The issue selected at each month-end re-balancing is the outstanding T-Bill that matures closest to, but not beyond, six months from the re-balancing date. The ML 1-Year T-Bill Index comprises a single issue purchased at the beginning of a month and held for a full month. At the end of that month, that issue is sold and rolled into a newly selected issue. The issue selected at each month-end re-balancing is the outstanding T-Bill with the longest maturity. The Indexes do not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Indexes would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE FIXED INCOME SERIES | 9
SECTION 1 GARTMORE ENHANCED INCOME FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select:
---------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY INSTITUTIONAL INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS R SHARES SERVICE CLASS SHARES CLASS SHARES ---------------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 2.25%(2) None None None ---------------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) None None None ---------------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ---------------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.35% 0.35% 0.35% 0.35% ---------------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 0.50% None None ---------------------------------------------------------------------------------------------------------------------------------- Other Expenses(4) 0.16% 0.34% 0.39% 0.14% ---------------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.76% 1.19% 0.74% 0.49% ---------------------------------------------------------------------------------------------------------------------------------- Amount of Fee Waiver/Expense Reimbursement(5) 0.04% 0.04% 0.04% 0.04% ---------------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 0.72% 1.15% 0.70% 0.45% ---------------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $100,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.35% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.02%, 0.20% and 0.25% respectively. The full 0.25% in administrative services fees is not reflected for Class A and Class R shares in "Other Expenses" at this time because the Fund does not currently sell Class A and Class R shares to intermediaries that charge the full amount permitted.
5 Gartmore Mutual Funds (the "Trust") and Gartmore Morley Capital Management, Inc. (the "Adviser") have entered into a written contract limiting operating expenses to 0.45% at least through May 1, 2008, for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 0.95% for Class A shares and 1.20% for Class R shares before the Adviser would be required to further limit the Fund's expenses.
10 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE ENHANCED INCOME FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 297 $ 458 $ 634 $ 1,142
--------------------------------------------------------------------------------
Class R shares 117 374 650 1,440
--------------------------------------------------------------------------------
Institutional Service Class shares 72 233 408 915
--------------------------------------------------------------------------------
Institutional Class shares 46 153 270 612
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE CORE FIXED INCOME SERIES | 11
SECTION 1 GARTMORE GOVERNMENT BOND FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks as high a level of current income as is consistent with preserving capital.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in U.S. GOVERNMENT SECURITIES and U.S. GOVERNMENT AGENCY SECURITIES. The Fund's management seeks to achieve the Fund's objective by investing in securities offering the highest level of expected income while simultaneously minimizing market price fluctuations.
In selecting investments for the Fund, the portfolio manager uses interest rate expectations, duration analysis, economic forecasting, market sector analysis and other techniques. The Fund may also look for bonds that the portfolio manager believes are undervalued, with the goal of buying them at attractive values and holding them as they increase in value. The Fund will generally maintain an average dollar-weighted MATURITY of five to nine years, and an average portfolio DURATION of four to six years.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a bond issuer may be unable to pay the interest or principal when due. This risk is more pronounced with lower rated bonds.
SELECTION RISK - the portfolio manager may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
If the value of the Fund's investments goes down, you may lose money.
12 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE GOVERNMENT BOND FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. Returns through May 11, 1998, are based on the performance of the Fund's predecessor fund. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS D SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 -------------------------------------------------------------------------------- 9.50% 8.20% -2.00% 12.90% 7.90% 11.00% 1.90% 3.42% 2.77% 3.85% |
BEST QUARTER: 5.58% - 3RD QTR OF 2001
WORST QUARTER: -2.48% - 2ND QTR OF 2004
After-tax returns are shown in the table for Class D shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A shares - Before Taxes(2) -0.92% 3.33% 5.16%
-------------------------------------------------------------------------------
Class B shares - Before Taxes(2) -2.17% 3.32% 5.08%
-------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 1.91% 3.66% 5.27%
-------------------------------------------------------------------------------
Class D shares - Before Taxes -0.82% 3.57% 5.37%
-------------------------------------------------------------------------------
Class D shares - After Taxes
on Distributions -2.25% 1.87% 3.27%
-------------------------------------------------------------------------------
Class D shares - After Taxes on
Distributions and Sales of Shares -0.55% 2.06% 3.31%
-------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 3.47% 4.26% 5.72%
-------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(2) 3.85% 4.55% 5.87%
-------------------------------------------------------------------------------
Merrill Lynch Government Master
Index(4) 3.48% 4.59% 5.99%
-------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns prior to the introduction of specific classes are based on both the previous performance of various classes of the predecessor fund and, after May 11, 1998, on the performance of various classes of the Fund as noted below. This performance is substantially similar to what the individual classes would have produced because all classes invest in the same portfolio of securities. Returns have been adjusted to reflect differences in applicable sales charges, if any, for individual classes. Returns have not been adjusted to reflect different expense levels, which if reflected may have resulted in higher or lower performance for a given share class.
Class A (introduced May 11, 1998): Performance is based on the predecessor fund.
Class B (introduced September 4, 2003): Performance is based on the predecessor fund through May 11, 1998 and the Fund's Class X from May 12, 1998, through September 4, 2003.
Class C (introduced September 4, 2003): Performance is based on the predecessor fund through May 11, 1998, the Fund's Class D from May 12, 1998, through March 1, 2001 and the Fund's Class Y from March 2, 2001 through September 4, 2003.
Class R (introduced October 1, 2003): Performance is based on the predecessor fund through May 11, 1998 and the Fund's Class D from May 12, 1998, through October 1, 2003.
Institutional Class (introduced June 29, 2004): Performance is based on the predecessor fund through May 11, 1998 and the Fund's Class D from May 12, 1998, through June 29, 2004.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 The Merrill Lynch Government Master Index is an unmanaged index of U.S. government bonds that gives a broad look at how those types of bonds have performed. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE FIXED INCOME SERIES | 13
SECTION 1 GARTMORE GOVERNMENT BOND FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
--------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY CLASS A CLASS B CLASS C CLASS D CLASS R INSTITUTIONAL FROM YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES --------------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 4.25%(2) None None 4.50%(2) None None --------------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None --------------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% --------------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) --------------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% --------------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% None 0.50% None --------------------------------------------------------------------------------------------------------------------------------- Other Expenses(7) 0.34% 0.22% 0.22% 0.29% 0.42% 0.22% --------------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 1.09% 1.72% 1.72% 0.79% 1.42% 0.72% --------------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of $100,000 or more of Class A and $50,000 or more of Class D shares is reduced or eliminated. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class:--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.75% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class D and Class R shares. For the year ended October 31, 2006, administrative services fees for Class A, Class D and Class R shares were 0.12%, 0.07% and 0.20%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
14 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE GOVERNMENT BOND FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 531 $ 757 $1,000 $1,697
--------------------------------------------------------------------------------
Class B shares 675 842 1,133 1,785
--------------------------------------------------------------------------------
Class C shares 275 542 933 2,030
--------------------------------------------------------------------------------
Class D shares 527 691 869 1,384
--------------------------------------------------------------------------------
Class R shares 145 449 776 1,702
--------------------------------------------------------------------------------
Institutional Class shares 74 230 401 894
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares:**
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 175 $ 542 $ 933 $1,785
--------------------------------------------------------------------------------
Class C shares 175 542 933 2,030
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class D, Class R and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE CORE FIXED INCOME SERIES | 15
SECTION 1 GARTMORE MONEY MARKET FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks as high a level of current income as is consistent with preserving capital and maintaining liquidity.
PRINCIPAL STRATEGIES
The Fund seeks to maintain a fixed net asset value of $1.00 per share by investing in high-quality money market obligations maturing in 397 days or less. These money market obligations primarily include:
o COMMERCIAL PAPER and other FIXED-INCOME SECURITIES issued by U.S. and foreign corporations;
o ASSET-BACKED SECURITIES comprised of commercial paper;
o U.S. GOVERNMENT SECURITIES and U.S. GOVERNMENT AGENCY SECURITIES;
o obligations of foreign governments;
o COMMERCIAL PAPER issued by states and municipalities and
o obligations of U.S. banks, foreign banks and U.S. branches of foreign banks.
All of the money market obligations held by the Fund must be denominated in U.S. dollars. The Fund's money market securities also must be rated in one of the two highest short-term categories by any nationally recognized statistical rating organization or, if unrated, be of comparable quality.
The Fund may invest in floating-and variable-rate obligations and may enter into repurchase agreements. The Fund's dollar-weighted average MATURITY will be 90 days or less.
Because the Fund invests in short-term securities, the portfolio manager generally sells securities only to meet liquidity needs, to maintain target allocations or to take advantage of more favorable opportunities.
PRINCIPAL RISKS
While the Fund seeks to preserve capital, there can be no guarantee that the Fund will meet its objective or be able to maintain a fixed net asset value of $1.00 per share; therefore, you could lose money.
There is no guarantee that the Fund will provide a certain level of income or that any such income will stay ahead of inflation. Investments in the Fund are not bank deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Other risks of investing in the Fund include:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a money market issuer may be unable to pay the interest or principal when due. This risk is more pronounced with lower rated instruments.
SELECTION RISK - the portfolio manager may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain money market instruments will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
SHARE REDUCTION RISK - In order to maintain a constant net asset value of $1.00 per share, the Fund may reduce the number of shares held by its shareholders.
If the value of the Fund's investments goes down, you may lose money.
16 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE MONEY MARKET FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. Returns through May 11, 1998, are based on the performance of the Fund's predecessor fund. All of the Fund's then-outstanding shares were reclassified as Prime shares on January 4, 1999. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 7-day yield.
ANNUAL TOTAL RETURNS - PRIME SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ----------------------------------------------------------------------------- 5.10% 5.10% 4.70% 5.90% 3.50% 1.10% 0.60% 0.83% 2.72% 4.56% |
BEST QUARTER: 1.52% - 4TH QTR OF 2000
WORST QUARTER: 0.13% - 3RD AND 4TH QTR OF 2003 AND 1ST AND 2ND QTR OF 2004
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
---------------------------------------------------------------------------------
Prime shares 4.56% 1.96% 3.39%
---------------------------------------------------------------------------------
Service Class shares(2) 4.38% 1.82% 3.29%
---------------------------------------------------------------------------------
Institutional Class shares(2) 4.61% 2.03% 3.43%
---------------------------------------------------------------------------------
iMoneyNet First Tier Retail Index(3) 4.29% 1.80% 3.29%
---------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns between May 11, 1998 and the introduction of the Service Class (January 4,1999) and the Institutional Class (December 31, 2001) include the previous performance of the Fund's Prime shares. This performance is substantially similar to what the individual classes would have produced because all classes invest in the same portfolio of securities. Performance has not been adjusted to reflect different expense levels, which if reflected would have resulted in lower performance for the Service Class.
3 The iMoneyNet First Tier Retail Index is an unmanaged index that is an average of non-government retail money market mutual funds that do not invest in any second-tier securities. Portfolio holdings of first-tier money market mutual funds include U.S. Treasury securities, other U.S. government securities, repurchase agreements, time deposits, domestic bank obligations, foreign bank obligations, first-tier commercial paper, floating-rate notes and asset-backed commercial paper. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE FIXED INCOME SERIES | 17
SECTION 1 GARTMORE MONEY MARKET FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses that you may pay when buying shares of the Fund, depending on the share class you select. There are no sales charges to purchase or sell shares of the Gartmore Money Market Fund.
---------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES PRIME SERVICE CLASS INSTITUTIONAL THAT ARE DEDUCTED FROM FUND ASSETS) SHARES SHARES CLASS SHARES ---------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.39% 0.39% 0.39% ---------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) None 0.10%(1) None ---------------------------------------------------------------------------------------------- Other Expenses(2) 0.20% 0.26% 0.15% ---------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.59% 0.75% 0.54% ---------------------------------------------------------------------------------------------- |
1 Pursuant to the Fund's Rule 12b-1 Plan, Service Class shares are subject to a maximum 12b-1 fee of 0.15% of the average daily net assets of the Fund's Service Class shares.
2 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Prime shares and Service Class shares. For the year ended October 31, 2006, administrative services fees for Prime shares and Service Class shares were 0.05% and 0.11%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
3 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 0.59% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative service fees were charged, "Total Annual Fund Operating Expenses" could increase to 0.99% for Service Class shares and 0.84% for Prime shares before the Adviser would be required to limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Prime shares $60 $189 $329 $738
--------------------------------------------------------------------------------
Service Class shares 77 240 417 930
--------------------------------------------------------------------------------
Institutional Class shares 55 173 302 677
--------------------------------------------------------------------------------
|
18 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE SHORT DURATION BOND FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to provide a high level of current income while preserving capital and minimizing fluctuations in share value.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests primarily in U.S. GOVERNMENT SECURITIES, U.S. GOVERNMENT AGENCY SECURITIES and CORPORATE BONDS that are INVESTMENT GRADE. The Fund also may purchase MORTGAGE-BACKED SECURITIES and ASSET-BACKED SECURITIES, and may invest in FIXED-INCOME SECURITIES that pay interest on either a fixed-rate or variable-rate basis.
In choosing securities for the Fund, the portfolio managers attempt to identify securities that, in their opinion, offer the best combination of yield, MATURITY and relative price performance, based on anticipated changes in interest rates and in the price relationships among various types of fixed-income securities. The portfolio managers may sell securities in order to buy others that they believe will better serve the objectives of the Fund.
The Fund is managed so that its DURATION generally will not exceed three years, and the Fund may enter into certain derivatives contracts, such as futures or options, solely for the purpose of adjusting the Fund's duration in order to minimize fluctuation of the Fund's share value.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a bond issuer may be unable to pay the interest or principal when due. This risk is more pronounced with high-yield bonds and other lower rated securities.
SELECTION RISK - the portfolio managers may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE CORE FIXED INCOME SERIES | 19
SECTION 1 GARTMORE SHORT DURATION BOND FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
Prior to October 4, 2004, the Fund was invested in a combination of short- and intermediate-term fixed-income securities and wrap contracts issued by financial institutions intended to stabilize the Fund's net asset value per share. Since that date, the Fund has ceased to use wrap contracts for that purpose. For the period between October 4, 2004 and December 6, 2004, the Fund concentrated its investments in short-term fixed-income instruments with less than 60 days to maturity. Beginning December 6, 2004, the Fund began to pursue its new investment objective and strategies as described herein and the Fund's share price fluctuates daily.
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2000 2001 2002 2003 2004 2005 2006 ----------------------------------------------------- 5.65% 5.47% 4.19% 2.88% 1.79% 1.53% 3.96% |
BEST QUARTER: 1.83% - 3RD QTR OF 2006
WORST QUARTER: -0.21% - 1ST QTR OF 2005
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
--------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR 5 YEARS (FEB. 1, 1999)
---------------------------------------------------------------------------------
Class A shares - Before Taxes(2) 1.59% 2.25% 3.38%
---------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions(2) 0.36% 1.12% 1.86%
---------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares(2) 1.01% 1.24% 1.95%
---------------------------------------------------------------------------------
Class C shares - Before Taxes(3) 2.83% 2.72% 3.68%
---------------------------------------------------------------------------------
Service Class shares - Before Taxes 3.84% 2.84% 3.76%
---------------------------------------------------------------------------------
IRA Class shares - Before Taxes 3.82% 2.82% 3.74%
---------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes 4.22% 3.21% 4.15%
---------------------------------------------------------------------------------
Merrill Lynch 1-3 Year Treasury Index(4) 3.96% 2.82% 4.15%
---------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns shown prior to the creation of Class A shares (7/16/03) include the previous performance of the Fund's IRA Class shares. This performance is substantially similar to what Class A shares would have produced because both classes invest in the same portfolio of securities and have the same expenses after any fee waiver or reimbursements. Class A returns have been restated for the applicable sales charges.
3 Returns before the first offering of Class C shares (2/28/05) are based on the previous performance of Class A shares. Excluding the effects of any fee waivers or reimbursements, this performance is substantially similar to what Class C shares would have produced because both classes invest in the same portfolio of securities. Returns for Class C shares have been adjusted to eliminate sales charges that do not apply to that class but have not been adjusted to reflect any lower expenses.
4 The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index that tracks short-term U.S. Treasury notes and bonds with maturities of one to three years. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
20 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE SHORT DURATION BOND FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES (PAID DIRECTLY SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS C SHARES SHARES CLASS SHARES IRA CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 2.25%(2) None None None None ------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 0.75%(4) None None None ------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(5) 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.35% 0.35% 0.35% 0.35% 0.35% ------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 0.75% 0.25% None 0.25% ------------------------------------------------------------------------------------------------------------------------------ Other Expenses(6) 0.21% 0.21% 0.29% 0.21% 0.34% ------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 0.81% 1.31% 0.89% 0.56% 0.94% ------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver/ Expense Reimbursement(7) 0.01% 0.01% 0.01% 0.01% 0.01% ------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 0.80% 1.30% 0.88% 0.55% 0.93% ------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $100,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.35% will apply to redemptions of Class A shares if purchased without sales charge and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC of 0.75% is charged if you sell Class C shares within the first
year after purchase. See Section 4, Investing with Gartmore Funds:
Choosing a Share Class--Class C Shares.
5 A redemption/exchange fee of 2% applies to shares redeemed or exchanged within seven calendar days after the date they were purchased. This fee is intended to discourage frequent trading of Fund shares that can negatively affect the Fund's performance. The fee does not apply to shares purchased through reinvested dividends or capital gains or shares held in omnibus accounts or retirement plans that cannot implement the fee.
6 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Service Class and IRA Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Service Class and IRA Class shares were 0.00%, 0.08% and 0.13%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Morley Capital Management, Inc. (the "Adviser") have entered into a written contract limiting operating expenses to 0.55% for at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative service fees were charged, "Total Annual Fund Operating Expenses" could increase to 1.05% for Class A shares, 1.05% for Service Class shares and 1.05% for IRA Class shares before the Adviser would be required to limit the Fund's expenses.
GARTMORE CORE FIXED INCOME SERIES | 21
SECTION 1 GARTMORE SHORT DURATION BOND FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $305 $477 $664 $1,203
--------------------------------------------------------------------------------
Class C shares 207 414 717 1,578
--------------------------------------------------------------------------------
Service Class shares 90 283 492 1,095
--------------------------------------------------------------------------------
Institutional Class shares 56 178 312 700
--------------------------------------------------------------------------------
IRA Class shares 95 299 519 1,154
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares:**
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class C shares $132 $414 $717 $1,578
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Service Class, Institutional Class and IRA Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
22 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE TAX-FREE INCOME FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks as high a level of current income that is exempt from federal income taxes as is consistent with preserving capital by investing in investment grade municipal obligations.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in INVESTMENT GRADE FIXED-INCOME SECURITIES that qualify as MUNICIPAL OBLIGATIONS. These obligations are issued by states, U.S. territories and their political subdivisions, such as counties, cities and towns. The Fund may also invest in other types of municipal obligations, including tax-exempt zero-coupon securities and floating- and variable-rate bonds, and may invest up to 20% of its net assets in municipal securities whose interest income is treated as a preference item for purposes of the federal alternative minimum tax. In selecting securities for the Fund, the Fund's management seeks value.
A security may be sold to take advantage of more favorable opportunities.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a municipal issuer may be unable to pay the interest or principal when due. This risk is more pronounced with high-yield bonds and other lower rated securities.
SELECTION RISK - the portfolio manager may select securities that underperform the markets, the relevant indices or other funds with similar investment objectives and strategies.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid off by the issuer more slowly than anticipated, causing the value of these securities to fall.
CALL AND REDEMPTION RISK - some bonds allow the issuer to call a bond for redemption before it matures. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
TAX RISK - a municipal bond that is issued as tax-exempt may later be declared to be taxable. In addition, if the federal income tax rate is reduced, the value of the tax-exemption may be less valuable, causing the value of a municipal bond to decline.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE CORE FIXED INCOME SERIES | 23
SECTION 1 GARTMORE TAX-FREE INCOME FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. Returns through May 11, 1998, are based on the performance of the Fund's predecessor fund. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Please call 800-848-0920 for the Fund's current 30-day yield.
ANNUAL TOTAL RETURNS - CLASS D SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 -------------------------------------------------------------------------------- 8.60% 5.60% -3.60% 11.40% 4.60% 8.50% 5.00% 4.44% 3.02% 3.67% |
BEST QUARTER: 4.66% - 3RD QTR OF 2002
WORST QUARTER: -2.66% - 2ND QTR OF 2004
After-tax returns are shown in the table for Class D shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A shares - Before Taxes(2) -1.01% 3.76% 4.37%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(2) -2.31% 3.56% 4.24%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 1.66% 3.93% 4.41%
--------------------------------------------------------------------------------
Class D shares - Before Taxes -1.03% 3.95% 4.58%
--------------------------------------------------------------------------------
Class D shares - After Taxes on
Distributions -1.06% 3.94% 4.55%
--------------------------------------------------------------------------------
Class D shares - After Taxes on
Distributions and Sales of Shares 0.84% 4.01% 4.58%
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index(4) 4.85% 5.53% 5.76%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns prior to the introduction of specific classes are based on both the previous performance of various classes of the predecessor fund and, after May 11, 1998, on the performance of various classes of the Fund as noted below. Excluding the effects of any fee waivers or reimbursements, this performance is substantially similar to what the individual classes would have produced because all classes invest in the same portfolio of securities. Performance has been adjusted to reflect differences in applicable sales charges, if any, for individual classes. Performance has not been adjusted to reflect different expense levels, which if reflected may have resulted in higher or lower performance for a given share class.
Class A (introduced May 11, 1998): Performance is based on the predecessor fund.
Class B (introduced September 4, 2003): Performance is based on the predecessor fund through May 11, 1998 and the Fund's Class X from May 12, 1998, through September 4, 2003.
Class C (introduced September 4, 2003): Performance is based on the predecessor fund through May 11, 1998, the Fund's Class D from May 12, 1998, through March 1, 2001 and the Fund's Class Y from March 2, 2001, through September 4, 2003.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 The Lehman Brothers Municipal Bond Index is an unmanaged index of municipal bonds that gives a broad look at how the prices of municipal bonds have performed. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
24 | GARTMORE CORE FIXED INCOME SERIES
SECTION 1 GARTMORE TAX-FREE INCOME FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
---------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES ---------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 4.25%(2) None None 4.50%(2) ---------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None ---------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% ---------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ---------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.50% 0.50% 0.50% 0.50% ---------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% None ---------------------------------------------------------------------------------------------------------------------- Other Expenses(7) 0.20% 0.20% 0.20% 0.20% ---------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.95% 1.70% 1.70% 0.70% ---------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of $100,000 or more of Class A and $50,000 or more of Class D shares is reduced or eliminated. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.75% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged within seven calendar days after the date they were purchased. This fee is intended to discourage frequent trading of Fund shares that can negatively affect the Fund's performance. The fee does not apply to shares purchased through reinvested dividends or capital gains or shares held in certain omnibus accounts or retirement plans that cannot implement the fee.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A and Class D shares. For the year ended October 31, 2006, administrative services fees for Class A and Class D shares were 0.00% and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
GARTMORE CORE FIXED INCOME SERIES | 25
SECTION 1 GARTMORE TAX-FREE INCOME FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 518 $ 715 $ 928 $ 1,542
--------------------------------------------------------------------------------
Class B shares 673 836 1,123 1,716
--------------------------------------------------------------------------------
Class C shares 273 536 923 2,009
--------------------------------------------------------------------------------
Class D shares 518 664 822 1,281
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 173 $ 536 $ 923 $ 1,716
--------------------------------------------------------------------------------
Class C shares 173 536 923 2,009
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more) and Class D shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
26 | GARTMORE CORE FIXED INCOME SERIES
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT TECHNIQUES AND RISKS
INTEREST RATE RISK - prices of fixed-income securities generally increase when interest rates decline and decrease when interest rates increase. Prices of longer term securities generally change more in response to interest rate changes than prices of shorter term securities. To the extent a Fund invests a substantial portion of its assets in fixed-income securities with longer term maturities, rising interest rates may cause the value of the Fund's investments to decline significantly.
CREDIT RISK - the risk that the issuer will be unable to pay the interest or principal when due. The degree of credit risk depends on both the financial condition of the issuer and the terms of the obligation. Changes in an issuer's credit rating can also adversely affect the value of a Fund's investments. High-yield bonds are generally more exposed to credit risk than investment grade securities.
EVENT RISK - the risk that a corporate event such as a restructuring, merger, leveraged buyout, takeover or similar action may cause a decline in market value or credit quality of the company's bonds due to factors including an unfavorable market response or a resulting increase in the company's debt. Added debt may significantly reduce the credit quality and market value of a company's bonds.
U.S. GOVERNMENT SECURITIES AND U.S. GOVERNMENT AGENCY SECURITIES - U.S. government securities include Treasury bills, notes and bonds issued or guaranteed by the U.S. government. Because these securities are backed by the full faith and credit of the U.S. government, they present little credit risk. However, the U.S. government does not guarantee the market value of its securities, and interest rate changes, prepayment rates and other factors may affect the value of U.S. government securities.
U.S. government agency securities may include obligations issued by:
o the Federal Housing Administration, the Farmers Home Administration and the Government National Mortgage Association ("GNMA"), including GNMA pass-through certificates;
o the Federal Home Loan Banks;
o the Federal National Mortgage Association ("FNMA");
o the Federal Home Loan Mortgage Corporation ("FHLMC") and
o the Federal Farm Credit Banks.
Unlike U.S. government securities, U.S. government agency securities have different levels of credit support from the government. GNMA pass-through mortgage certificates are backed by the full faith and credit of the U.S. government. While FNMA, FHLMC and the Federal Home Loan Banks are chartered by Acts of Congress, their securities are backed only by the credit of the respective instrumentality and are not issued or guaranteed by the U.S. government. Although certain government agency securities are guaranteed, market price and yield of the securities and net asset value and performance of a Fund are not guaranteed.
MORTGAGE-BACKED SECURITIES - these fixed-income securities represent the right to receive a portion of principal and/or interest payments made on a pool of residential or commercial mortgage loans. When interest rates fall, borrowers may refinance or otherwise repay principal on their loans earlier than scheduled. When this happens, certain types of mortgage-backed securities will be paid off more quickly than originally anticipated and a Fund will have to invest the proceeds in securities with lower yields. This risk is known as "prepayment risk." When interest rates rise, certain types of mortgage-backed securities will be paid off more slowly than originally anticipated and the value of these securities will fall. This risk is known as "extension risk."
Because of prepayment risk and extension risk, mortgage-backed securities react differently to changes in interest rates than other fixed-income securities. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain mortgage-backed securities.
ASSET-BACKED SECURITIES - Like traditional fixed-income securities, the value of asset-backed securities typically increases when interest rates fall and decreases when interest rates rise. Certain asset-backed securities may also be subject to the risk of prepayment. In a period of declining interest rates, borrowers may pay what they owe on the underlying assets more quickly than anticipated. Prepayment reduces the yield to maturity and the average life of the asset-backed securities. In addition, when a Fund reinvests the proceeds of a prepayment, it may receive a lower interest rate. In a period of rising interest rates, prepayments may occur at a slower rate than expected. As a result, the average maturity of a Fund's portfolio may increase. The value of longer term securities generally changes more in response to changes in interest rates than shorter term securities.
HIGH-YIELD BONDS AND OTHER LOWER RATED SECURITIES - Investment in high-yield bonds and other lower rated securities involves substantial risk of loss. These securities are considered to be speculative with respect to the issuer's ability to pay interest and principal when due and are susceptible to default or decline in market value due to adverse economic and business developments. The market values of high-yield securities tend to be very volatile, and these securities are less liquid than investment-grade debt securities. Therefore, Funds that invest in high-yield bonds are subject to the following risks:
o increased price sensitivity to changing interest rates and to adverse economic and business developments;
o greater risk of loss due to default or declining credit quality;
o greater likelihood that adverse economic or company specific events will make the issuer unable to make interest and/or principal payments when due and
o negative market sentiments toward high-yield securities may depress their price and liquidity. If this occurs, it may become difficult to price or dispose of a particular security held by a Fund.
GARTMORE CORE FIXED INCOME SERIES | 27
SECTION 2 FUND DETAILS (CONT.)
FOREIGN SECURITIES RISK - Foreign securities in which a Fund may invest may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities, the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
REPURCHASE AGREEMENTS - When entering into a repurchase agreement, a Fund essentially makes a short-term loan to a qualified bank or broker-dealer. The Fund buys securities that the seller has agreed to buy back at a specified time and at a set price that includes interest. There is a risk that the seller will be unable to buy back the securities at the time required and the Fund could experience delays in recovering amounts owed to it.
DERIVATIVES - a derivative is a contract with its value based on the performance of an underlying financial asset, index or other measure. For example, an option is a derivative because its value changes in relation to the performance of an underlying stock. The value of an option on a futures contract varies with the value of the underlying futures contract, which in turn varies with the value of the underlying commodity or security. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset to which the derivative is linked changes in unexpected ways. Some risks of investing in derivatives include:
o the other party to the derivatives contract may fail to fulfill its obligations;
o their use may reduce liquidity and make the Fund harder to value, especially in declining markets;
o the Fund may suffer disproportionately heavy losses relative to the amount invested and
o changes in the value of derivatives may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
ZERO COUPON BONDS - These securities pay no interest during the life of the security and are issued by a wide variety of governmental issuers. They often are sold at a deep discount. Zero coupon bonds may be subject to greater price changes as a result of changing interest rates than bonds that make regular interest payments; their value tends to grow more during periods of falling interest rates and, conversely, tends to fall more during periods of rising interest rates. Although not traded on a national securities exchange, zero coupon bonds are widely traded by brokers and dealers, and are considered liquid. Holders of zero coupon bonds are required by federal income tax laws to pay taxes on the interest, even though such payments are not actually being made. To avoid federal income tax liability, a Fund may have to make distributions to shareholders and may have to sell some assets at inappropriate times in order to generate cash for the distributions.
FLOATING- AND VARIABLE-RATE SECURITIES - These securities do not have fixed interest rates. Instead, the rates change over time. Floating-rate securities have interest rates that vary with changes to a specific measure, such as the Treasury bill rate. Variable-rate securities have interest rates that change at preset times based on the specific measure. Some floating-and variable-rate securities may be callable by the issuer, meaning that they can be paid off before their maturity date and the proceeds may be required to be invested in lower yielding securities that reduce a Fund's income.
Like other fixed-income securities, floating and variable rate securities are subject to interest rate risk. A Fund will only purchase a floating- or variable-rate security of the same quality as the debt securities it would otherwise purchase.
SECURITIES LENDING - Each of the Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances, these events could trigger adverse tax consequences to a Fund.
CREDIT DEFAULT SWAP AGREEMENTS - The Gartmore Bond Fund may enter into a credit default swap, both (i) directly and (ii) indirectly in the form of a swap embedded within a structured note, to protect against the risk that a security will default. A Fund pays a fee to enter into the trade and receives a fixed payment during the life of the swap. If there is a credit event, a Fund either delivers the defaulted bond (if the Fund has taken a short position in the credit default swap) or pays the par amount of the defaulted bond (if the Fund has taken the long position in the credit default swap note). Risks of credit default swaps include the cost of paying for credit protection if there are no credit events.
28 | GARTMORE CORE FIXED INCOME SERIES
SECTION 2 FUND DETAILS (CONT.)
PORTFOLIO TURNOVER - Each of the Funds may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
TEMPORARY INVESTMENTS - Each of Gartmore Bond Fund, Gartmore Enhanced Income Fund, Gartmore Government Bond Fund, Gartmore Short Duration Bond Fund and Gartmore Tax-Free Income Fund generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances and interest-bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
GARTMORE CORE FIXED INCOME SERIES | 29
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISERS
Gartmore Mutual Fund Capital Trust ("GMFCT"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the investment adviser for Gartmore Bond Fund, Gartmore Government Bond Fund, Gartmore Money Market Fund and Gartmore Tax-Free Income Fund (the "GMFCT Funds"). GMFCT was organized in 1999 as an investment adviser for mutual funds.
Gartmore Morley Capital Management, Inc. ("GMCM"), located at 5665 S.W. Meadows Road, Lake Oswego, Oregon 97035, is the investment adviser for the Gartmore Enhanced Income Fund and Gartmore Short Duration Bond Fund (the "Morley Funds") and is responsible for managing the Funds' investments and supervising the Funds' daily business affairs. GMCM was organized in 1983 as an Oregon corporation and is a registered investment adviser. The firm focuses its investment management business on providing fixed-income management services to tax-qualified retirement plans, mutual funds, collective investment trusts and separate investment accounts.
GMFCT and GMCM (the "Advisers") are part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of GMFCT, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase GMFCT (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with GMFCT. The purchase of GMFCT by NFS may be deemed to constitute a change of control, terminating GMFCT's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with GMFCT with respect to the GMFCT Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with GMFCT are subject to the approval of the GMFCT Fund's respective shareholders. The sale of GMFCT to NFS currently is anticipated to close during the second quarter of 2007.
In connection with the transactions proposed pursuant to the Purchase Agreement, the Board of Trustees of the Trust has also approved new investment advisory agreements with respect to the Morley Funds under which GMFCT would replace GMCM as the investment adviser to such Funds. The new investment advisory agreements with respect to the Morley Funds are, with the exception of the identity of the adviser, identical to the existing investment advisory agreements in all material respects. At the same time, the Board of Trustees has approved the appointment of GMCM as the subadviser to each of the Morley Funds. Both the appointment of GMFCT as investment adviser to the Morley Funds and the appointment of GMCM as their subadviser are subject to approval of the Morley Funds' respective shareholders.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
Each Fund pays its investment adviser a management fee based on each Fund's average daily net assets. The total aggregate management fees paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of each Fund's average daily net assets and taking into account any applicable waivers, were as follows:
-------------------------------------------------------------------------------- FUND ACTUAL MANAGEMENT FEE PAID -------------------------------------------------------------------------------- Gartmore Bond Fund 0.50% -------------------------------------------------------------------------------- Gartmore Enhanced Income Fund 0.31% -------------------------------------------------------------------------------- Gartmore Government Bond Fund 0.50% -------------------------------------------------------------------------------- Gartmore Money Market Fund 0.39% -------------------------------------------------------------------------------- Gartmore Short Duration Bond Fund 0.25% -------------------------------------------------------------------------------- Gartmore Tax-Free Income Fund 0.50% -------------------------------------------------------------------------------- |
The total annual advisory fees that can be paid to each Fund's respective Adviser (as a percentage of average daily net assets) are as follows:
-------------------------------------------------------------------------------- FUND/ASSETS MANAGEMENT FEE -------------------------------------------------------------------------------- GARTMORE BOND FUND, GARTMORE GOVERNMENT BOND FUND AND GARTMORE TAX-FREE INCOME FUND -------------------------------------------------------------------------------- $0 up to $250 million 0.50% -------------------------------------------------------------------------------- $250 million up to $1 billion 0.475% -------------------------------------------------------------------------------- $1 billion up to $2 billion 0.45% -------------------------------------------------------------------------------- $2 billion up to $5 billion 0.425% -------------------------------------------------------------------------------- $5 billion or more 0.40% -------------------------------------------------------------------------------- GARTMORE ENHANCED INCOME FUND AND GARTMORE SHORT DURATION BOND FUND -------------------------------------------------------------------------------- $0 up to 500 million 0.35% -------------------------------------------------------------------------------- $500 million up to $1 billion 0.34% -------------------------------------------------------------------------------- $1 billion up to $3 billion 0.325% -------------------------------------------------------------------------------- $3 billion up to $5 billion 0.30% -------------------------------------------------------------------------------- $5 billion up to $10 billion 0.285% -------------------------------------------------------------------------------- $10 billion or more 0.275% -------------------------------------------------------------------------------- GARTMORE MONEY MARKET FUND -------------------------------------------------------------------------------- Up to $1 billion 0.40% -------------------------------------------------------------------------------- $1 billion up to $2 billion 0.38% -------------------------------------------------------------------------------- $2 billion up to $5 billion 0.36% -------------------------------------------------------------------------------- $5 billion or more 0.34% -------------------------------------------------------------------------------- |
A discussion of the basis for the Board of Trustees' approval of the investment advisory agreements for the Funds will be available in the Funds' semiannual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
30 | GARTMORE CORE FIXED INCOME SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
PORTFOLIO MANAGEMENT
GARTMORE BOND FUND
Gary S. Davis, CFA and Mabel C. Brown, CFA, CPA are portfolio co-managers of the Gartmore Bond Fund and are responsible for the day-to-day management of the Fund, including the selection of the Fund's investments.
Mr. Davis joined Nationwide Insurance, an affiliate of the Fund's investment adviser, in 1998 as a senior portfolio manager and is currently a director. He manages and co-manages with Ms. Brown, other institutional fixed-income accounts for Nationwide Insurance. Prior to joining Nationwide Insurance, he was with John Nuveen/Flagship Financial for five years.
Ms. Brown joined Nationwide Insurance, an affiliate of the Fund's investment adviser, in 1998 as a senior investment analyst and is currently a director. She also co-manages with Mr. Davis, other institutional fixed-income accounts for Nationwide Insurance. Prior to joining Nationwide Insurance, she was with the Ohio Bureau of Workers' Compensation.
GARTMORE ENHANCED INCOME FUND AND GARTMORE SHORT DURATION BOND FUND
Perpetua M. Phillips, vice president and senior portfolio manager, and Shane Johnston, portfolio manager, are responsible for the day-to-day management of the Funds, including the selection of the Funds' investments.
Ms. Phillips joined GMCM in 1999. She has 16 years of experience in finance and investments, including portfolio management of indexed and total return portfolios and fixed-income research and analysis.
Mr. Johnston joined GMCM in 2000. He has five years of experience in finance and investments, including fixed-income portfolio management and training.
GARTMORE GOVERNMENT BOND FUND
Gary R. Hunt, CFA, is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. Mr. Hunt has either managed or co-managed the Gartmore Government Bond Fund and its predecessor funds, since March 1997. He currently also manages the Gartmore GVIT Government Bond Fund and an offshore U.S. government bond fund. He joined Nationwide Insurance, an affiliate of the Fund's investment adviser, in 1992 as a securities analyst. He is currently a director and manages the U.S. Treasury, Agency and Agency Mortgage Backed sector for Nationwide Insurance.
GARTMORE MONEY MARKET FUND
Dan Blevins, CFA, is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments, on behalf of the Adviser. Mr. Blevins joined Nationwide Insurance, an affiliate of the Fund's Adviser, in 1996 and now serves as Manager of Short Term Investments. While at Nationwide Insurance, Mr. Blevins has worked as an accountant and in the investment research department. He has managed short-term portfolios for the past six years.
GARTMORE TAX-FREE INCOME FUND
Alpha Benson is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. Ms. Benson joined Nationwide Insurance, an affiliate of the Fund's investment adviser, in 1977 as a financial analyst and now serves as Director of Municipal Securities. She has managed the Gartmore Tax-Free Income Fund and its predecessor since its inception in March 1986.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Advisers and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows each Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Advisers) without the approval of shareholders. The order also allows the Advisers to revise subadvisory agreements with non-affiliated subadvisers with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are managed directly by the Advisers, but if a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows these Funds greater flexibility and enables them to operate more efficiently.
In instances where either of the Advisers hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers; and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Advisers do not expect to frequently recommend subadviser changes. Where the Advisers do recommend the hiring of a subadviser, they periodically provides written reports to the Board of Trustees regarding their evaluation and monitoring. Although the Advisers monitor the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
GARTMORE CORE FIXED INCOME SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
When selecting a share class, you should consider the following:
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
Your financial adviser can help you to decide which share class is best suited to your needs.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right and on the next page compares Class A, Class B, Class C and Prime shares, which are available to all investors, and Class D shares which are available only to certain investors.
Class R, Service Class, Institutional Service Class, Institutional Class and IRA Class shares also are available only to certain investors. For eligible investors these share classes may be more suitable than Class A, Class B, Class C or Prime shares.
IRA Class shares of the Gartmore Short Duration Bond Fund are closed to new investors, including any exchanges from other Gartmore mutual funds. Existing shareholders are permitted to continue to invest in the Fund both directly and through exchanges from other Gartmore Funds, as well as through dividend and capital gains reinvestments. The Fund will continue to monitor the cash flows from existing shareholders and may close the Fund to all further investments by existing shareholders at some point.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS D, CLASS B,
CLASS C AND PRIME SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES AND
CLASS D SHARES
Front-end sales charge A front-end sales charge means that a portion of
up to 4.25% for Class A your initial investment goes toward the sales
shares and 4.50% for charge and is not invested.
Class D shares. (2.25%
for Gartmore Enhanced
Income Fund and Reduction and waivers of sales charges may be
Gartmore Short Duration available.
Bond Fund)
Total annual operating expenses are lower than Class
Contingent deferred B and Class C expenses (CDSC)(1) which means
sales charge higher dividends and/or net asset value ("NAV")
(Class A shares only) per share.
No conversion feature.
Annual service and/or
12b-1 fee of 0.25% No maximum investment amount.
(Class A shares only)
Administrative services
fee of up to 0.25%
--------------------------------------------------------------------------------
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines 1% in most years to zero after six
years.
Annual service and/or Total annual operating expenses are higher than Class
12b-1 fee of 1.00% A charges which means lower dividends and/or NAV
per share.
No administrative
services fee
Automatic conversion to Class A shares after seven
years, which means lower annual expenses in the
future.
Maximum investment amount of $100,000. Larger
investments may be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full investment
(0.75% for Gartmore immediately goes toward buying shares.
Short Duration Bond No reduction of CDSC, but waivers may be available.
Fund) The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are higher than Class
12b-1 fee of 1.00% A charges which means lower dividends and/or NAV
(0.75% for Gartmore per share.
Short Duration Bond
Fund)
No conversion feature.
No administrative Maximum investment amount of $1,000,000(2). Larger
services fee investments may be rejected.
--------------------------------------------------------------------------------
|
32 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
COMPARING CLASS A, CLASS D, CLASS B,
CLASS C AND PRIME SHARES (CONT.)
CLASSES AND CHARGES POINTS TO CONSIDER PRIME SHARES (GARTMORE MONEY MARKET FUND) No annual service and/or No front-end sales charge means your full investment 12b-1 fee immediately goes toward buying shares. Administrative services No maximum investment amount. fee of up to 0.25% -------------------------------------------------------------------------------- |
1 A CDSC of up to 0.75% for the Gartmore Bond Fund, the Gartmore Government Bond Fund and the Gartmore Tax-Free Income Fund; and 0.35% for the Gartmore Enhanced Income Fund and the Gartmore Short Duration Bond Fund will be charged on Class A shares redeemed within 18 months of purchase (or two years in the case of the Gartmore Enhanced Income Fund and the Gartmore Short Duration Bond Fund) if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES FOR GARTMORE BOND FUND, GARTMORE GOVERNMENT BOND FUND AND GARTMORE TAX-FREE INCOME FUND
--------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
--------------------------------------------------------------------------------
Less than $100,000 4.25% 4.44% 3.75%
--------------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
--------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
--------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
--------------------------------------------------------------------------------
$1 million or more None None None*
--------------------------------------------------------------------------------
|
FRONT-END SALES CHARGES FOR CLASS A
SHARES FOR GARTMORE ENHANCED INCOME FUND AND GARTMORE SHORT DURATION BOND FUND
--------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
--------------------------------------------------------------------------------
Less than $100,000 2.25% 2.30% 2.00%
--------------------------------------------------------------------------------
$100,000 to $499,999 1.75 1.78 1.50
--------------------------------------------------------------------------------
$500,000 to $999,999 1.50 1.52 1.25
--------------------------------------------------------------------------------
$1 million or more None None None*
--------------------------------------------------------------------------------
|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
CLASS D SHARES
Class D shares are available to the following:
o Investors who received Class D shares of a Fund in the reorganization of Nationwide Investing Foundation, Nationwide Investing Foundation II and Financial Horizons Investment Trust into Gartmore Mutual Funds in May 1998, as long as they purchase the Class D shares through the same account in the same capacity and
o Persons eligible to purchase Class D shares without a sales charge as described below and in the SAI.
FRONT-END SALES CHARGES FOR CLASS D SHARES
--------------------------------------------------------------------------------
SALES CHARGE
AS A PERCENTAGE DEALER
OF NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
--------------------------------------------------------------------------------
Less than $50,000 4.50% 4.71% 4.00%
--------------------------------------------------------------------------------
$50,000 to $99,999 4.00 4.17 3.50
--------------------------------------------------------------------------------
$100,000 to $249,999 3.00 3.09 2.50
--------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 1.75
--------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.25
--------------------------------------------------------------------------------
$1 million or more None None None
--------------------------------------------------------------------------------
|
GARTMORE CORE FIXED INCOME SERIES | 33
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
REDUCTION AND WAIVER OF CLASS A AND CLASS D SALES CHARGES
If you qualify for a reduction or waiver of Class A or Class D sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries; and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A and Class D Sales Charges" and "Waiver of Class A and Class D Sales Charges" below and "Reduction of Class A and Class D Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A AND CLASS D SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A and Class D shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (as shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchase of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
WAIVER OF CLASS A AND CLASS D SALES CHARGES
Front-end sales charges on Class A and Class D shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges. (Class A shares only);
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor. (Class A shares only);
o any investor who pays for shares with proceeds from redemptions of Gartmore Fund Class D shares;
o retirement plans. (Class A shares only);
o investment advisory clients of Gartmore Mutual Fund Capital Trust, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
34 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase (24 months for Gartmore Enhanced Income Fund and Gartmore Short Duration Bond Fund). The CDSC covers the finders fee paid to the selling dealer. The Class A CDSC will not exceed the aggregate amount of the finder's fee the Distributor paid to the selling dealer on all purchases of Class A shares of all Gartmore Funds you made that were subject to the Class A CDSC.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason;
o a finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES
----------------------------------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE ----------------------------------------------------------------------------------------- Amount of CDSC on Gartmore Enhanced Income Fund and Gartmore Short Duration Bond Fund if redeemed within 24 months of initial purchase 0.35% 0.25% 0.15% ----------------------------------------------------------------------------------------- Amount of CDSC on other Funds if redeemed within 18 months of purchase 0.75% 0.50% 0.25% ----------------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges--Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Funds is described above; however, the CDSCs for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES CLASS A, CLASS B AND CLASS C SHARES
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
If you qualify for a waiver of a CDSC, you must notify Customer Service, your financial adviser or intermediary at the time of purchase and must also provide any required evidence showing that you qualify. For more complete information, see the SAI.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
----------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
----------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
----------------------------------------------------------------------------------
|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the Class B shares converted; however, the total dollar value is the same.
GARTMORE CORE FIXED INCOME SERIES | 35
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1% (0.75% for Class C shares of the Gartmore Short Duration Bond Fund).
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges--Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
SHARE CLASSES AVAILABLE ONLY TO INSTITUTIONAL ACCOUNTS
The Funds offer Class R, Service Class, Institutional Service Class and Institutional Class shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
o the appropriate level and type of fee to compensate the intermediary. An intermediary may receive different compensation depending on which class is chosen.
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial service firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
INSTITUTIONAL SERVICE CLASS AND SERVICE CLASS SHARES
Institutional Service Class and Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals whose adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Fund;
o retirement plans for which no third-party administrator receives compensation from the Funds;
o institutional advisory accounts of the Advisers or their affiliates, those accounts which have client relationships with an affiliate of the Advisers, their affiliates and their corporate sponsors and subsidiaries; and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
36 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C, Class R, IRA Class and Service Class shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or shareholder servicing fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Class D, Institutional Service Class, Institutional Class and Prime shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C, Class R, IRA Class and Service Class shares (Money Market Fund only) pay the Distributor annual amounts not exceeding the following:
-------------------------------------------------------------------------
CLASS AS A % OF DAILY NET ASSETS
-------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
-------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
-------------------------------------------------------------------------
Class C shares 1.00%* (0.25% service fee)
-------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
-------------------------------------------------------------------------
Service Class shares
(Money Market Fund only) 0.15% (distribution or service fee)
-------------------------------------------------------------------------
Service Class shares
(Short Duration Bond Fund only) 0.25% (distribution or service fee)
-------------------------------------------------------------------------
IRA Class shares 0.25% (distribution or service fee)
-------------------------------------------------------------------------
|
* 0.75% for Gartmore Short Duration Bond Fund
ADMINISTRATIVE SERVICES FEES
Class A, Class D, Class R, Institutional Service Class, Service Class, IRA Class and Prime shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A, Class R, IRA Class and Service Class shares as described above.) These fees are paid by the Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual administrative services fee of 0.25% for Class A, Class D, Class R, Service Class, IRA Class and Prime shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class D, Class R, Institutional Service Class, Service Class, IRA Class and Prime share assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
GARTMORE CORE FIXED INCOME SERIES | 37
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
REVENUE SHARING
Each Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Advisers;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
38 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS D, CLASS B AND CLASS C SHARES
All transaction orders must be received by the Funds' agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND THE 60-DAY WRITTEN NOTICE TO SHAREHOLDERS.
OFFERING OF SHARES AT ANY TIME. ** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
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THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, exchange intermediaries who are authorized to accept purchase, exchange
and redemption orders for the Funds. Your transaction is and redemption orders for the Funds. Your transaction is
processed at the NAV next calculated after the Funds' agent or processed at the NAV next calculated after the Funds' agent or
an authorized intermediary receives your order in proper form. an authorized intermediary receives your order in proper form.
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BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. dollars mailing or faxing a letter to Gartmore Funds. The letter must
and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT CASH, STARTER include your account number(s) and the name(s) of the Fund(s)
CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, CREDIT CARD you wish to exchange from and to. The letter must be signed by
CHECKS OR MONEY ORDERS. all account owners. We reserve the right to request original
documents for any faxed requests.
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BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The Funds unless you decline this option on your application. The Funds
follow procedures to confirm that telephone instructions are follow procedures to confirm that telephone instructions are
genuine and will not be liable for any loss, injury, damage or genuine and will not be liable for any loss, injury, damage or
expense that results from executing such instructions. The Funds expense that results from executing such instructions. The Funds
may revoke telephone privileges at any time, without notice to may revoke telephone privileges at any time, without notice to
shareholders. shareholders. For redemptions, shareholders who own shares in an
IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made payable
to the shareholder(s) of record will be mailed to the address of
record.
The Funds may record telephone instructions to redeem shares and
may request redemption instructions in writing, signed by all
shareholders on the account.
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ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line transactions website. However, the Funds may discontinue on-line transactions
of Fund shares at any time. of Fund shares at any time.
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BY BANK WIRE. You may have your bank transmit funds by federal BY BANK WIRE. The Funds can wire the proceeds of your redemption
funds wire to the Funds' custodian bank. (The authorization will directly to your account at a commercial bank. A voided check
be in effect unless you give the Funds written notice of its must be attached to your application. (The authorization will be
termination.) in effect unless you give the Fund written notice of its
termination.)
o if you choose this method to open a new account, you must
call our toll-free number before you wire your investment o your proceeds typically will be wired to your bank on the
and arrange to fax your completed application. next business day after your order has been processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the
redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in order to receive
the current day's NAV. o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund your Gartmore BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds can
Funds' account with proceeds from your bank via ACH on the be sent to your bank via ACH on the second business day after
second business day after your purchase order has been your order has been processed. A voided check must be attached
processed. A voided check must be attached to your application. to your application. Money sent through ACH should reach your
Money sent through ACH typically reaches Gartmore Funds from bank in two business days. There is no fee for this service.
your bank in two business days. There is no fee for this (The authorization will be in effect unless you give the Funds
service. (The authorization will be in effect unless you give written notice of its termination.)
the Funds written notice of its termination.)
ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans or plan administrator regarding transactions. Retirement plans or
their administrators wishing to conduct transactions should call their administrators wishing to conduct transactions should call
our toll-free number. Eligible entities or individuals wishing our toll-free number. Eligible entities or individuals wishing
to conduct transactions in Institutional Service Class or to conduct transactions in Institutional Service Class or
Institutional Class shares should call our toll-free number Institutional Class shares should call our toll-free number.
GARTMORE CORE FIXED INCOME SERIES | 39
|
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of the last quoted bid price. Where such bid prices are either unavailable or are deemed by the Advisers to be unreliable, a Fair Valuation Committee, consisting of employees of the Advisers, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair and do not result in dilution of shareholder interests or other harm to shareholders.
The Gartmore Money Market Fund's securities are valued at amortized cost, which approximates market value, in accordance with Rule 2a-7 of the Investment Company Act of 1940.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
40 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
MINIMUM INVESTMENTS
CLASS A, CLASS B, CLASS C, CLASS D AND PRIME SHARES To open an account $2,000 (per Fund) To open an IRA account $1,000 (per Fund) Additional investments $100 (per Fund) To start an Automatic Asset Accumulation Plan $1,000 Additional Investments (Automatic Asset Accumulation Plan) $50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS AND SERVICE CLASS SHARES To open an account $50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- IRA CLASS SHARES To open an account $1,000 (per Fund) Additional investments $100 Additional Investments (Automatic Asset Accumulation Plan) $50 -------------------------------------------------------------------------------- |
Minimum investment requirements do not apply to certain retirement plans, fee-based programs or omnibus accounts. If you purchase shares through an intermediary, different minimum account requirements may apply. The Distributor reserves the right to waive the investment minimums under certain circumstances.
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or other financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. For Prime Shares of Gartmore Money Market Fund, if the average monthly value of your account falls below $250, you are generally subject to a $2 monthly fee. Shares from your account are redeemed each quarter/month to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the low-balance fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below the minimum. In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class D, Class B, Class C, Class R, Service Class, Institutional Service Class or Institutional Class shares. However,
o if you exchange from Class A shares of a Fund with a lower sales charge to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
GARTMORE CORE FIXED INCOME SERIES | 41
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund.)
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class D, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem shares in Class A, Class D, Class B, Class C, Prime and IRA Class shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell, or in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or Gartmore Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
MEDALLION SIGNATURE GUARANTEE
A medallion signature guarantee is required for redemptions of shares of the Funds in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
A medallion signature guarantee is a certification by a bank, brokerage firm or other financial institution that a customer's signature is valid. Medallion signature guarantees can be provided by members of the STAMP program. We reserve the right to require a medallion signature guarantee in other circumstances, without notice.
42 | GARTMORE CORE FIXED INCOME SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or sales and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Advisers; its subadvisers and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund also has implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through certain intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
GARTMORE CORE FIXED INCOME SERIES | 43
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70-1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or sale within 30 calendar days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund with the exchange for less than the minimum holding period listed below:
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MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
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Gartmore China Opportunities Fund 2.00% 90
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Gartmore Emerging Markets Fund 2.00% 90
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Gartmore Global Financial Services Fund 2.00% 90
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Gartmore Global Health Sciences Fund 2.00% 90
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Gartmore Global Natural Resources Fund 2.00% 90
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Gartmore Global Technology and
Communications Fund 2.00% 90
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Gartmore Global Utilities Fund 2.00% 90
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Gartmore Hedged Core Equity Fund 2.00% 90
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Gartmore International Growth Fund 2.00% 90
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Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
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Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
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Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
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Gartmore Small Cap Value Fund 2.00% 90
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Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
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Gartmore Value Opportunities Fund 2.00% 90
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Gartmore Worldwide Leaders Fund 2.00% 90
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NorthPointe Small Cap Growth Fund 2.00% 90
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Gartmore Growth Fund 2.00% 30
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Gartmore Large Cap Value Fund 2.00% 30
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Gartmore Nationwide Fund 2.00% 30
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Gartmore Nationwide Leaders Fund 2.00% 30
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Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
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Gartmore Bond Index Fund 2.00% 7
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Gartmore Government Bond Fund 2.00% 7
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Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
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Gartmore Short Duration Bond Fund 2.00% 7
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Gartmore S&P 500 Index Fund 2.00% 7
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Gartmore Small Cap Index Fund 2.00% 7
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Gartmore Tax-Free Income Fund 2.00% 7
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|
44 | GARTMORE CORE FIXED INCOME SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee a Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
The Gartmore Money Market Fund expects to declare daily and distribute net investment income, if any, to shareholders as dividends monthly. The Gartmore Bond, Gartmore Government Bond, Gartmore Tax-Free Income, Gartmore Enhanced Income and Gartmore Short Duration Bond Funds expect to declare and distribute net investment income, if any, to shareholders as dividends monthly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
GARTMORE TAX-FREE INCOME FUND
Most distributions from the Tax-Free Income Fund will consist of exempt-interest dividends (dividends paid from interest earned on municipal securities). In general, these dividends are exempt from regular federal income tax. Any taxable distributions will be reported on Form 1099-DIV. Exempt-interest dividends from interest earned on municipal securities of a state or its political subdivisions, generally are also exempt from that state's personal income tax. Income from municipal securities of other states generally does not qualify as tax-free. Because of these tax exemptions, a tax-free fund may not be a suitable investment for retirement plans and other tax-exempt investors. Corporate shareholders should note that exempt-interest dividends may be fully taxable in states that impose corporate franchise taxes, and they should consult with their tax advisers about the taxability of this income before investing in the Fund. Exempt-interest dividends are taken into account when determining the taxable portion of your Social Security or railroad retirement benefits. Each Fund may invest a portion of its assets in private activity bonds. The income from these bonds is a tax preference item when determining your federal alternative minimum tax.
GARTMORE CORE FIXED INCOME SERIES | 45
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in the Funds through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gain distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
46 | GARTMORE CORE FIXED INCOME SERIES
SECTION 6 GARTMORE BOND FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31, or if a Fund or a class has not been in operation for the past five years, for the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET UNREALIZED TOTAL
VALUE, NET GAINS FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS ACTIVITIES
-------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $9.58 0.50 (0.15) 0.35
Year Ended October 31, 2003 $9.43 0.46 0.24 0.70
Year Ended October 31, 2004 $9.67 0.43 0.08 0.51
Year Ended October 31, 2005 $9.75 0.40 (0.22) 0.18
Year Ended October 31, 2006 $9.53 0.44 0.04 0.48
-------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (d) $9.49 0.06 0.18 0.24
Year Ended October 31, 2004 $9.67 0.36 0.08 0.44
Year Ended October 31, 2005 $9.75 0.34 (0.22) 0.12
Year Ended October 31, 2006 $9.53 0.39 0.02 0.41
-------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d) $9.50 0.06 0.18 0.24
Year Ended October 31, 2004 $9.68 0.36 0.08 0.44
Year Ended October 31, 2005 $9.76 0.34 (0.22) 0.12
Year Ended October 31, 2006 $9.54 0.39 0.02 0.41
-------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $9.59 0.52 (0.15) 0.37
Year Ended October 31, 2003 $9.44 0.49 0.24 0.73
Year Ended October 31, 2004 $9.68 0.45 0.09 0.54
Year Ended October 31, 2005 $9.77 0.43 (0.22) 0.21
Year Ended October 31, 2006 $9.55 0.48 0.02 0.50
-------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.50) (0.50) $9.43 3.84%
Year Ended October 31, 2003 (0.46) (0.46) $9.67 7.55%
Year Ended October 31, 2004 (0.43) (0.43) $9.75 5.37%
Year Ended October 31, 2005 (0.40) (0.40) $9.53 1.87%
Year Ended October 31, 2006 (0.43) (0.43) $9.58 5.22%
--------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (d) (0.06) (0.06) $9.67 2.50%(g)
Year Ended October 31, 2004 (0.36) (0.36) $9.75 4.66%
Year Ended October 31, 2005 (0.34) (0.34) $9.53 1.18%
Year Ended October 31, 2006 (0.37) (0.37) $9.57 4.41%
--------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d) (0.06) (0.06) $9.68 2.49%(g)
Year Ended October 31, 2004 (0.36) (0.36) $9.76 4.63%
Year Ended October 31, 2005 (0.34) (0.34) $9.54 1.18%
Year Ended October 31, 2006 (0.37) (0.37) $9.58 4.40%
--------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 (0.52) (0.52) $9.44 4.07%
Year Ended October 31, 2003 (0.49) (0.49) $9.68 7.81%
Year Ended October 31, 2004 (0.45) (0.45) $9.77 5.75%
Year Ended October 31, 2005 (0.43) (0.43) $9.55 2.15%
Year Ended October 31, 2006 (0.46) (0.46) $9.59 5.39%
--------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF
RATIO OF INVESTMENT
RATIO EXPENSES INCOME
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES TO INCOME TO MENTS) TO MENTS) TO
PERIOD AVERAGE NET AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 7,551 1.06% 5.34% (i) (i) 27.66%
Year Ended October 31, 2003 $ 10,128 1.08% 4.74% (i) (i) 17.73%
Year Ended October 31, 2004 $ 10,669 1.04% 4.38% (i) (i) 17.20%
Year Ended October 31, 2005 $ 10,212 1.10% 4.15% (i) (i) 34.08%
Year Ended October 31, 2006 $ 11,434 1.08% 4.76% 1.08% 4.76% 36.06%
----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (d) $ 24 1.83%(h) 3.62%(h) (i) (i) 17.73%
Year Ended October 31, 2004 $ 102 1.72% 3.64% (i) (i) 17.20%
Year Ended October 31, 2005 $ 223 1.78% 3.46% (i) (i) 34.08%
Year Ended October 31, 2006 $ 268 1.75% 4.12% 1.75% 4.12% 36.06%
----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d) $ 9 1.87%(h) 3.60%(h) (i) (i) 17.73%
Year Ended October 31, 2004 $ 182 1.72% 3.48% (i) (i) 17.20%
Year Ended October 31, 2005 $ 696 1.78% 3.45% (i) (i) 34.08%
Year Ended October 31, 2006 $ 1,306 1.74% 4.15% 1.74% 4.15% 36.06%
----------------------------------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $136,049 0.83% 5.58% (i) (i) 27.66%
Year Ended October 31, 2003 $127,591 0.82% 5.00% (i) (i) 17.73%
Year Ended October 31, 2004 $112,631 0.78% 4.64% (i) (i) 17.20%
Year Ended October 31, 2005 $ 99,133 0.83% 4.41% (i) (i) 34.08%
Year Ended October 31, 2006 $ 83,878 0.80% 5.00% 0.80% 5.00% 36.06%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 4, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(g) Not annualized.
(h) Annualized.
(i) There were no fee reductions during the period.
GARTMORE CORE FIXED INCOME SERIES | 47
SECTION 6 GARTMORE BOND FUND FINANCIAL HIGHLIGHTS (CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET UNREALIZED TOTAL
VALUE, NET GAINS FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $9.80 0.03 (0.12) (0.09)
Year Ended October 31, 2004 $9.68 0.39 0.09 0.48
Year Ended October 31, 2005 $9.77 0.40 (0.22) 0.18
Year Ended October 31, 2006 $9.55 0.42 0.03 0.45
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (g) $9.50 0.15 0.26 0.41
Year Ended October 31, 2005 $9.76 0.43 (0.21) 0.22
Year Ended October 31, 2006 $9.55 0.47 0.03 0.50
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) (0.03) (0.03) $9.68 (0.92%)(h)
Year Ended October 31, 2004 (0.39) (0.39) $9.77 5.06%
Year Ended October 31, 2005 (0.40) (0.40) $9.55 1.81%
Year Ended October 31, 2006 (0.41) (0.41) $9.59 4.88%
---------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) (0.15) (0.15) $9.76 4.32%(h)
Year Ended October 31, 2005 (0.43) (0.43) $9.55 2.30%
Year Ended October 31, 2006 (0.46) (0.46) $9.59 5.45%
---------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF
RATIO OF INVESTMENT
RATIO EXPENSES INCOME
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES TO INCOME TO MENTS) TO MENTS) TO
PERIOD AVERAGE NET AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 1 1.85%(h) 3.48%(h) 1.95%(h) 3.38%(h) 17.73%
Year Ended October 31, 2004 $ 1 1.37% 3.99% (i) (i) 17.20%
Year Ended October 31, 2005 $ 1 1.14% 4.08% (i) (i) 34.08%
Year Ended October 31, 2006 $ 1 1.30% 4.53% 1.30% 4.53% 36.06%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) $ 260 0.73%(h) 4.51%(h) (i) (i) 17.20%
Year Ended October 31, 2005 $ 4,641 0.78% 4.47% (i) (i) 34.08%
Year Ended October 31, 2006 $12,233 0.74% 5.17% 0.74% 5.17% 36.06%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 4, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(g) Not annualized.
(h) Annualized.
(i) There were no fee reductions during the period.
48 | GARTMORE CORE FIXED INCOME SERIES
SECTION 6 GARTMORE ENHANCED INCOME FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
----------------------------------------------------------------------------------------
NET
REALIZED AND
NET ASSET UNREALIZED
VALUE, NET GAINS TOTAL FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS ACTIVITIES
----------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9.70 0.41 (0.26) 0.15
Year Ended October 31, 2003 $ 9.44 0.30 (0.18) 0.12
Year Ended October 31, 2004 $ 9.26 0.16 (0.09) 0.07
Year Ended October 31, 2005 $ 9.16 0.22 (0.07) 0.15
Year Ended October 31, 2006 $ 9.08 0.32 0.05 0.37
----------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 9.30 0.02 (0.03) (0.01)
Year Ended October 31, 2004 $ 9.27 0.13 (0.09) 0.04
Year Ended October 31, 2005 $ 9.17 0.22 (0.07) 0.15
Year Ended October 31, 2006 (g) $ 9.09 0.32 0.05 0.37
----------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 9.71 0.42 (0.27) 0.15
Year Ended October 31, 2003 $ 9.44 0.31 (0.17) 0.14
Year Ended October 31, 2004 $ 9.27 0.17 (0.09) 0.08
Year Ended October 31, 2005 $ 9.17 0.23 (0.07) 0.16
Year Ended October 31, 2006 (g) $ 9.09 0.32 0.05 0.37
----------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $ 9.70 0.45 (0.26) 0.19
Year Ended October 31, 2003 $ 9.44 0.33 (0.18) 0.15
Year Ended October 31, 2004 $ 9.26 0.19 (0.08) 0.11
Year Ended October 31, 2005 $ 9.17 0.25 (0.07) 0.18
Year Ended October 31, 2006 $ 9.09 0.34 0.04 0.38
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
DISTRIBUTIONS
----------------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
----------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.41) (0.41) $ 9.44 1.60%
Year Ended October 31, 2003 (0.30) (0.30) $ 9.26 1.31%
Year Ended October 31, 2004 (0.17) (0.17) $ 9.16 0.73%
Year Ended October 31, 2005 (0.23) (0.23) $ 9.08 1.66%
Year Ended October 31, 2006 (0.32) (0.32) $ 9.13 4.15%
----------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) (0.02) (0.02) $ 9.27 (0.13%)(e)
Year Ended October 31, 2004 (0.14) (0.14) $ 9.17 0.48%
Year Ended October 31, 2005 (0.23) (0.23) $ 9.09 1.70%
Year Ended October 31, 2006 (0.32) (0.32) $ 9.14 4.12%
----------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 (0.42) (0.42) $ 9.44 1.60%
Year Ended October 31, 2003 (0.31) (0.31) $ 9.27 1.50%
Year Ended October 31, 2004 (0.18) (0.18) $ 9.17 0.82%
Year Ended October 31, 2005 (0.24) (0.24) $ 9.09 1.77%
Year Ended October 31, 2006 (g) (0.32) (0.32) $ 9.14 4.17%
----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (0.45) (0.45) $ 9.44 1.96%
Year Ended October 31, 2003 (0.33) (0.33) $ 9.26 1.64%
Year Ended October 31, 2004 (0.20) (0.20) $ 9.17 1.07%
Year Ended October 31, 2005 (0.26) (0.26) $ 9.09 2.13%
Year Ended October 31, 2006 (0.34) (0.34) $ 9.13 4.31%
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO EXPENSES INCOME
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,691 0.79% 4.28% 0.95% 4.12% 32.97%
Year Ended October 31, 2003 $ 2,404 0.78% 3.11% 0.88% 3.01% 29.97%
Year Ended October 31, 2004 $ 1,575 0.80% 1.74% 0.85% 1.69% 51.59%
Year Ended October 31, 2005 $ 1,242 0.80% 2.36% 0.85% 2.31% 60.80%
Year Ended October 31, 2006 $ 1,570 0.72% 3.51% 0.76% 3.47% 77.44%
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 1 1.05%(f) 2.01%(f) 1.15%(f) 1.91%(f) 29.97%
Year Ended October 31, 2004 $ 1 1.00% 1.49% 1.00% 1.49% 51.59%
Year Ended October 31, 2005 $ 1 0.72% 2.42% 0.72% 2.42% 60.80%
Year Ended October 31, 2006 $ 1 0.74% 3.50% 0.74% 3.50% 77.44%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 10,093 0.70% 4.41% 0.90% 4.21% 32.97%
Year Ended October 31, 2003 $ 9,256 0.70% 3.25% 0.80% 3.15% 29.97%
Year Ended October 31, 2004 $ 7,476 0.70% 1.84% 0.75% 1.79% 51.59%
Year Ended October 31, 2005 $ 5,661 0.70% 2.47% 0.75% 2.42% 60.80%
Year Ended October 31, 2006 (g) $ 12 0.70% 3.47% 0.73% 3.44% 77.44%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $ 57,703 0.45% 4.57% 0.64% 4.38% 32.97%
Year Ended October 31, 2003 $ 155,704 0.45% 3.40% 0.55% 3.30% 29.97%
Year Ended October 31, 2004 $ 299,898 0.45% 2.05% 0.50% 2.00% 51.59%
Year Ended October 31, 2005 $ 452,749 0.45% 2.76% 0.50% 2.71% 60.80%
Year Ended October 31, 2006 $ 437,052 0.45% 3.79% 0.49% 3.75% 77.44%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) Not annualized.
(f) Annualized.
(g) Net investment income (loss) is based on average shares outstanding during the period.
GARTMORE CORE FIXED INCOME SERIES | 49
SECTION 6 GARTMORE GOVERNMENT BOND FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET UNREALIZED
VALUE, NET GAINS TOTAL FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 10.95 0.45 0.20 0.65
Year Ended October 31, 2003 $ 10.95 0.41 (0.16) 0.25
Year Ended October 31, 2004 $ 10.61 0.35 0.03 0.38
Year Ended October 31, 2005 $ 10.37 0.35 (0.20) 0.15
Year Ended October 31, 2006 $ 10.17 0.40 0.02 0.42
--------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (d) $ 10.48 0.06 0.12 0.18
Year Ended October 31, 2004 $ 10.61 0.28 0.03 0.31
Year Ended October 31, 2005 $ 10.37 0.29 (0.20) 0.09
Year Ended October 31, 2006 $ 10.17 0.34 0.02 0.36
--------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d) $ 10.48 0.06 0.12 0.18
Year Ended October 31, 2004 $ 10.61 0.28 0.03 0.31
Year Ended October 31, 2005 $ 10.37 0.29 (0.21) 0.08
Year Ended October 31, 2006 $ 10.16 0.34 0.03 0.37
--------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $ 10.96 0.48 0.19 0.67
Year Ended October 31, 2003 $ 10.95 0.44 (0.15) 0.29
Year Ended October 31, 2004 $ 10.62 0.38 0.02 0.40
Year Ended October 31, 2005 $ 10.37 0.38 (0.20) 0.18
Year Ended October 31, 2006 $ 10.17 0.43 0.02 0.45
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 10.77 0.04 (0.16) (0.12)
Year Ended October 31, 2004 $ 10.62 0.32 0.03 0.35
Year Ended October 31, 2005 $ 10.38 0.35 (0.21) 0.14
Year Ended October 31, 2006 $ 10.17 0.40 0.03 0.43
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) $ 10.11 0.12 0.28 0.40
Year Ended October 31, 2005 (j) $ 10.38 0.39 (0.21) 0.18
Year Ended October 31, 2006 $ 10.17 0.44 0.02 0.46
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.45) (0.20) (0.65) $ 10.95 6.42%
Year Ended October 31, 2003 (0.40) (0.19) (0.59) $ 10.61 2.29%
Year Ended October 31, 2004 (0.36) (0.26) (0.62) $ 10.37 3.68%
Year Ended October 31, 2005 (0.35) -- (0.35) $ 10.17 1.46%
Year Ended October 31, 2006 (0.39) (0.01) (0.40) $ 10.19 4.25%
--------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (d) (0.05) -- (0.05) $ 10.61 1.73%(g)
Year Ended October 31, 2004 (0.29) (0.26) (0.55) $ 10.37 3.04%
Year Ended October 31, 2005 (0.29) -- (0.29) $ 10.17 0.85%
Year Ended October 31, 2006 (0.33) (0.01) (0.34) $ 10.19 3.61%
--------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d) (0.05) -- (0.05) $ 10.61 1.73%(g)
Year Ended October 31, 2004 (0.29) (0.26) (0.55) $ 10.37 3.03%
Year Ended October 31, 2005 (0.29) -- (0.29) $ 10.16 0.75%
Year Ended October 31, 2006 (0.33) (0.01) (0.34) $ 10.19 3.69%
--------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 (0.48) (0.20) (0.68) $ 10.95 6.61%
Year Ended October 31, 2003 (0.43) (0.19) (0.62) $ 10.62 2.67%
Year Ended October 31, 2004 (0.39) (0.26) (0.65) $ 10.37 3.87%
Year Ended October 31, 2005 (0.38) -- (0.38) $ 10.17 1.76%
Year Ended October 31, 2006 (0.42) (0.01) (0.43) $ 10.19 4.55%
--------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) (0.03) -- (0.03) $ 10.62 (1.12%)(g)
Year Ended October 31, 2004 (0.33) (0.26) (0.59) $ 10.38 3.41%
Year Ended October 31, 2005 (0.35) -- (0.35) $ 10.17 1.34%
Year Ended October 31, 2006 (0.39) (0.01) (0.40) $ 10.20 4.35%
--------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) (0.13) -- (0.13) $ 10.38 4.00%(g)
Year Ended October 31, 2005 (j) (0.39) -- (0.39) $ 10.17 1.72%
Year Ended October 31, 2006 (0.43) (0.01) (0.44) $ 10.19 4.68%
--------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------
RATIO OF
RATIO OF INVESTMENT
RATIO EXPENSES INCOME
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 55,510 1.07% 4.28% 1.11% 4.24% 99.42%
Year Ended October 31, 2003 $ 56,589 1.10% 3.76% (i) (i) 106.65%
Year Ended October 31, 2004 $ 55,481 1.07% 3.37% (i) (i) 110.72%
Year Ended October 31, 2005 $ 54,166 1.10% 3.41% (i) (i) 117.67%
Year Ended October 31, 2006 $ 31,586 1.09% 3.95% 1.09% 3.95% 150.10%
----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (d) $ 1 1.80%(h) 3.52%(h) (i) (i) 106.65%
Year Ended October 31, 2004 $ 170 1.69% 2.75% (i) (i) 110.72%
Year Ended October 31, 2005 $ 152 1.71% 2.79% (i) (i) 117.67%
Year Ended October 31, 2006 $ 361 1.69% 3.42% 1.69% 3.42% 150.10%
----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d) $ 65 1.76%(h) 4.11%(h) (i) (i) 106.65%
Year Ended October 31, 2004 $ 296 1.69% 2.75% (i) (i) 110.72%
Year Ended October 31, 2005 $ 331 1.71% 2.80% (i) (i) 117.67%
Year Ended October 31, 2006 $ 2,645 1.69% 3.45% 1.69% 3.45% 150.10%
----------------------------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $174,637 0.81% 4.52% 0.81% 4.52% 99.42%
Year Ended October 31, 2003 $154,556 0.82% 4.03% (i) (i) 106.65%
Year Ended October 31, 2004 $121,325 0.78% 3.66% (i) (i) 110.72%
Year Ended October 31, 2005 $105,987 0.81% 3.70% (i) (i) 117.67%
Year Ended October 31, 2006 $ 92,547 0.79% 4.24% 0.79% 4.24% 150.10%
----------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 1 1.48%(h) 4.13%(h) 1.58%(h) 4.03%(h) 106.65%
Year Ended October 31, 2004 $ 1 1.37% 3.12% (i) (i) 110.72%
Year Ended October 31, 2005 $ 1 1.06% 3.39% (i) (i) 117.67%
Year Ended October 31, 2006 $ 1 1.08% 3.96% 1.08% 3.96% 150.10%
----------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) $ 14 0.69% 3.66%(h) (i) (i) 110.72%
Year Ended October 31, 2005 (j) $ 1 0.72% 3.85% (i) (i) 117.67%
Year Ended October 31, 2006 $ 1 0.72% 4.38% 0.72% 4.38% 150.10%
----------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 4, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(g) Not annualized.
(h) Annualized.
(i) There were no fee reductions during the period.
(j) Net investment income (loss) is based on average shares outstanding during the period.
50 | GARTMORE CORE FIXED INCOME SERIES
SECTION 6 GARTMORE MONEY MARKET FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES DISTRIBUTIONS
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET
VALUE, NET TOTAL FROM NET NET ASSET
BEGINNING INVESTMENT INVESTMENT INVESTMENT TOTAL VALUE, END
OF PERIOD INCOME ACTIVITIES INCOME DISTRIBUTIONS OF PERIOD TOTAL RETURN
-----------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (b) $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 1.12%(c)
Year Ended October 31, 2003 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 0.77%
Year Ended October 31, 2004 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 0.73%
Year Ended October 31, 2005 $ 1.00 0.02 0.02 (0.02) (0.02) $ 1.00 2.41%
Year Ended October 31, 2006 $ 1.00 0.04 0.04 (0.04) (0.04) $ 1.00 4.40%
-----------------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 1.11%
Year Ended October 31, 2003 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 0.59%
Year Ended October 31, 2004 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 0.52%
Year Ended October 31, 2005 $ 1.00 0.02 0.02 (0.02) (0.02) $ 1.00 2.21%
Year Ended October 31, 2006 $ 1.00 0.04 0.04 (0.04) (0.04) $ 1.00 4.17%
-----------------------------------------------------------------------------------------------------------------------------
PRIME SHARES
Year Ended October 31, 2002 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 1.23%
Year Ended October 31, 2003 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 0.69%
Year Ended October 31, 2004 $ 1.00 0.01 0.01 (0.01) (0.01) $ 1.00 0.67%
Year Ended October 31, 2005 $ 1.00 0.02 0.02 (0.02) (0.02) $ 1.00 2.36%
Year Ended October 31, 2006 $ 1.00 0.04 0.04 (0.04) (0.04) $ 1.00 4.35%
-----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------
RATIO RATIO OF RATIO OF NET
OF NET EXPENSES INVESTMENT
NET ASSETS RATIO OF INVESTMENT (PRIOR TO INCOME (PRIOR TO
AT END OF EXPENSES TO INCOME TO REIMBURSEMENTS) REIMBURSEMENTS)
PERIOD AVERAGE AVERAGE TO AVERAGE TO AVERAGE
(000S) NET ASSETS NET ASSETS NET ASSETS (a) NET ASSETS (a)
--------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (b) $ 8,606 0.59%(d) 1.25%(d) (e) (e)
Year Ended October 31, 2003 $1,214,406 0.56% 0.73% (e) (e)
Year Ended October 31, 2004 $1,219,343 0.54% 0.73% (e) (e)
Year Ended October 31, 2005 $1,525,487 0.55% 2.40% (e) (e)
Year Ended October 31, 2006 $1,271,826 0.54% 4.32% (e) (e)
--------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 627,365 0.80% 1.09% 0.96% 0.93%
Year Ended October 31, 2003 $ 8,473 0.75% 0.89% 0.92% 0.72%
Year Ended October 31, 2004 $ 5,952 0.75% 0.51% 0.78% 0.48%
Year Ended October 31, 2005 $ 6,710 0.75% 2.30% 0.88% 2.16%
Year Ended October 31, 2006 $ 9,901 0.75% 4.14% 0.80% 4.09%
--------------------------------------------------------------------------------------------------------------------
PRIME SHARES
Year Ended October 31, 2002 $1,177,541 0.70% 1.22% (e) (e)
Year Ended October 31, 2003 $ 470,771 0.64% 0.73% (e) (e)
Year Ended October 31, 2004 $ 395,038 0.60% 0.66% (e) (e)
Year Ended October 31, 2005 $ 334,991 0.60% 2.31% (e) (e)
Year Ended October 31, 2006 $ 359,067 0.59% 4.27% (e) (e)
--------------------------------------------------------------------------------------------------------------------
|
(a) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(b) For the period from December 13, 2001 (commencement of operations) through October 31, 2002.
(c) Not annualized.
(d) Annualized.
(e) There were no fee reductions in this period.
GARTMORE CORE FIXED INCOME SERIES | 51
SECTION 6 GARTMORE SHORT DURATION BOND FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-----------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES DISTRIBUTIONS
-----------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET NET
BEGINNING INCOME (LOSSES) ON INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES INCOME GAINS DISTRIBUTIONS
-----------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2003 (d) $ 10.00 0.08 -- 0.08 (0.08) -- (0.08)
Year Ended October 31, 2004 $ 10.00 0.23 (0.07) 0.16 (0.23) (0.01) (0.24)
Year Ended October 31, 2005 $ 10.00 0.25 (0.15) 0.10 (0.27) -- (0.27)
Year Ended October 31, 2006 $ 9.83 0.30 0.07 0.37 (0.33) -- (0.33)
-----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005 (e) $ 9.91 0.13 (0.06) 0.07 (0.15) -- (0.15)
Year Ended October 31, 2006 $ 9.83 0.27 0.07 0.34 (0.29) -- (0.29)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $ 10.00 0.47 -- 0.47 (0.47) (0.04) (0.51)
Year Ended October 31, 2003 $ 10.00 0.34 -- 0.34 (0.34) -- (0.34)
Year Ended October 31, 2004 $ 10.00 0.27 (0.07) 0.20 (0.27) (0.01) (0.28)
Year Ended October 31, 2005 $ 10.00 0.27 (0.15) 0.12 (0.29) -- (0.29)
Year Ended October 31, 2006 $ 9.83 0.33 0.07 0.40 (0.36) -- (0.36)
-----------------------------------------------------------------------------------------------------------------------
IRA CLASS SHARES
Year Ended October 31, 2002 $ 10.00 0.43 -- 0.43 (0.43) (0.04) (0.47)
Year Ended October 31, 2003 $ 10.00 0.29 0.01 0.30 (0.30) -- (0.30)
Year Ended October 31, 2004 $ 10.00 0.23 (0.07) 0.16 (0.23) (0.01) (0.24)
Year Ended October 31, 2005 $ 10.00 0.24 (0.15) 0.09 (0.26) -- (0.26)
Year Ended October 31, 2006 $ 9.83 0.28 0.08 0.36 (0.32) -- (0.32)
-----------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 10.00 0.44 -- 0.44 (0.44) (0.04) (0.48)
Year Ended October 31, 2003 $ 10.00 0.30 -- 0.30 (0.30) -- (0.30)
Year Ended October 31, 2004 $ 10.00 0.22 (0.07) 0.15 (0.22) (0.01) (0.23)
Year Ended October 31, 2005 $ 10.00 0.24 (0.15) 0.09 (0.26) -- (0.26)
Year Ended October 31, 2006 $ 9.83 0.30 0.07 0.37 (0.33) -- (0.33)
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
CAPITAL
CONTRIBU- NET ASSET
REVERSE TIONS FROM VALUE, END TOTAL
STOCK SPLIT ADVISER OF PERIOD RETURN (a)
-----------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2003 (d) -- -- $ 10.00 0.76%(f)
Year Ended October 31, 2004 0.01(i) 0.07 $ 10.00 2.35%(j)
Year ded October 31, 2005 -- -- $ 9.83 0.98%
Year Ended October 31, 2006 -- -- $ 9.87 3.87%
-----------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005 (e) -- -- $ 9.83 0.76%(f)
Year Ended October 31, 2006 -- -- $ 9.88 3.52%
-----------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 0.04(h) -- $ 10.00 4.84%
Year Ended October 31, 2003 -- -- $ 10.00 3.41%
Year Ended October 31, 2004 0.01(i) 0.07 $ 10.00 2.69%(k)
Year Ended October 31, 2005 -- -- $ 9.83 1.24%
Year Ended October 31, 2006 -- -- $ 9.87 4.13%
-----------------------------------------------------------------------------------------
IRA CLASS SHARES
Year Ended October 31, 2002 0.04(h) -- $ 10.00 4.41%
Year Ended October 31, 2003 -- -- $ 10.00 2.99%
Year Ended October 31, 2004 0.01(i) 0.07 $ 10.00 2.30%(l)
Year Ended October 31, 2005 -- -- $ 9.83 0.90%
Year Ended October 31, 2006 -- -- $ 9.87 3.73%
-----------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 0.04(h) -- $ 10.00 4.44%
Year Ended October 31, 2003 -- -- $ 10.00 3.05%
Year Ended October 31, 2004 0.01(i) 0.07 $ 10.00 2.26%(m)
Year Ended October 31, 2005 -- -- $ 9.83 0.95%
Year Ended October 31, 2006 -- -- $ 9.87 3.78%
-----------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
INVESTMENT
RATIO RATIO OF INCOME
OF NET EXPENSES (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2003 (d) $ 42 0.95%(g) 2.68%(g) 1.05%(g) 2.58%(g) 16.61%
Year Ended October 31, 2004 $ 1,585 0.86% 2.08% 0.96% 1.98% 129.96%
Year Ended October 31, 2005 $ 1,017 0.78% 2.40% 0.88% 2.30% 292.03%
Year Ended October 31, 2006 $ 959 0.71% 3.14% 0.81% 3.04% 28.68%
-------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005 (e) $ 1 1.40%(g) 2.08%(g) 1.40%(g) 2.08%(g) 292.03%
Year Ended October 31, 2006 $ 142 1.18% 2.71% 1.28% 2.61% 28.68%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $ 19,239 0.57% 4.73% 0.71% 4.69% 37.37%
Year Ended October 31, 2003 $ 47,491 0.60% 3.40% 0.70% 3.30% 16.61%
Year Ended October 31, 2004 $ 72,996 0.54% 2.63% 0.64% 2.53% 129.96%
Year Ended October 31, 2005 $ 6,741 0.49% 2.46% 0.59% 2.36% 292.03%
Year Ended October 31, 2006 $ 5,354 0.46% 3.38% 0.56% 3.28% 28.68%
-------------------------------------------------------------------------------------------------------------------------------
IRA CLASS SHARES
Year Ended October 31, 2002 $ 38,001 1.01% 4.00% 1.11% 4.00% 37.37%
Year Ended October 31, 2003 $ 413,934 1.01% 2.90% 1.11% 2.80% 16.61%
Year Ended October 31, 2004 $ 369,014 0.91% 2.29% 1.01% 2.19% 129.96%
Year Ended October 31, 2005 $ 43,888 0.83% 2.21% 0.93% 2.11% 292.03%
Year Ended October 31, 2006 $ 22,263 0.84% 2.99% 0.94% 2.89% 28.68%
-------------------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 84,679 0.96% 4.23% 1.08% 4.21% 37.37%
Year Ended October 31, 2003 $ 196,569 0.95% 3.06% 1.05% 2.96% 16.61%
Year Ended October 31, 2004 $ 263,900 0.97% 2.20% 1.07% 2.10% 129.96%
Year Ended October 31, 2005 $ 80,818 0.83% 2.31% 0.93% 2.21% 292.03%
Year Ended October 31, 2006 $ 67,817 0.79% 3.05% 0.89% 2.95% 28.68%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from July 16, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from February 28, 2005 (commencement of operations) through October 31, 2005.
(f) Not annualized.
(g) Annualized.
(h) Per share numbers prior to December 31, 2001 have been adjusted to reflect a 1.003633 for 1 reverse stock split.
(i) Per share numbers prior to April 16, 2004 have been adjusted to reflect a 1.00620 for 1 reverse stock split.
(j) The total return includes a contribution from adviser. If that contribution had not taken place, the total return would have been 1.63%.
(k) The total return includes a contribution from adviser. If that contribution had not taken place, the total return would have been 1.97%.
(l) The total return includes a contribution from adviser. If that contribution had not taken place, the total return would have been 1.58%.
(m) The total return includes a contribution from adviser. If that contribution had not taken place, the total return would have been 1.54%.
52 | GARTMORE CORE FIXED INCOME SERIES
SECTION 6 GARTMORE TAX-FREE INCOME FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------
NET
REALIZED AND
NET ASSET UNREALIZED
VALUE, NET GAINS TOTAL FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 10.51 0.47 -- 0.47
Year Ended October 31, 2003 $ 10.51 0.44 (0.02) 0.42
Year Ended October 31, 2004 $ 10.49 0.43 0.18 0.61
Year Ended October 31, 2005 $ 10.67 0.39 (0.18) 0.21
Year Ended October 31, 2006 $ 10.49 0.43 0.01 0.44
---------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003(c) $ 10.28 0.06 0.20 0.26
Year Ended October 31, 2004 $ 10.48 0.35 0.19 0.54
Year Ended October 31, 2005 $ 10.67 0.32 (0.20) 0.12
Year Ended October 31, 2006 $ 10.48 0.35 0.02 0.37
---------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003(c) $ 10.27 0.06 0.20 0.26
Year Ended October 31, 2004 $ 10.47 0.36 0.17 0.53
Year Ended October 31, 2005 $ 10.64 0.32 (0.19) 0.13
Year Ended October 31, 2006 $ 10.46 0.35 0.02 0.37
---------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $ 10.50 0.49 0.01 0.50
Year Ended October 31, 2003 $ 10.51 0.47 (0.02) 0.45
Year Ended October 31, 2004 $ 10.49 0.46 0.18 0.64
Year Ended October 31, 2005 $ 10.67 0.42 (0.19) 0.23
Year Ended October 31, 2006 $ 10.48 0.46 0.02 0.48
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.47) (0.47) $ 10.51 4.57%
Year Ended October 31, 2003 (0.44) (0.44) $ 10.49 4.09%
Year Ended October 31, 2004 (0.43) (0.43) $ 10.67 5.97%
Year Ended October 31, 2005 (0.39) (0.39) $ 10.49 1.98%
Year Ended October 31, 2006 (0.43) (0.43) $ 10.50 4.30%
---------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003(c) (0.06) (0.06) $ 10.48 2.48%(d)
Year Ended October 31, 2004 (0.35) (0.35) $ 10.67 5.28%
Year Ended October 31, 2005 (0.31) (0.31) $ 10.48 1.19%
Year Ended October 31, 2006 (0.35) (0.35) $ 10.50 3.52%
---------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003(c) (0.06) (0.06) $ 10.47 2.48%(d)
Year Ended October 31, 2004 (0.36) (0.36) $ 10.64 5.12%
Year Ended October 31, 2005 (0.31) (0.31) $ 10.46 1.30%
Year Ended October 31, 2006 (0.35) (0.35) $ 10.48 3.53%
---------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 (0.49) (0.49) $ 10.51 4.94%
Year Ended October 31, 2003 (0.47) (0.47) $ 10.49 4.36%
Year Ended October 31, 2004 (0.46) (0.46) $ 10.67 6.23%
Year Ended October 31, 2005 (0.42) (0.42) $ 10.48 2.24%
Year Ended October 31, 2006 (0.46) (0.46) $ 10.50 4.56%
---------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------
RATIO
OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE PORTFOLIO
(000S) NET ASSETS NET ASSETS TURNOVER (b)
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 7,586 0.99% 4.48% 27.77%
Year Ended October 31, 2003 $ 7,580 0.98% 4.20% 16.91%
Year Ended October 31, 2004 $ 9,599 0.93% 4.10% 0.00%
Year Ended October 31, 2005 $ 10,054 0.98% 3.67% 3.70%
Year Ended October 31, 2006 $ 8,714 0.95% 4.12% 1.91%
--------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003(c) $ 41 1.72%(e) 3.54%(e) 16.91%
Year Ended October 31, 2004 $ 370 1.68% 3.36% 0.00%
Year Ended October 31, 2005 $ 602 1.73% 2.90% 3.70%
Year Ended October 31, 2006 $ 792 1.70% 3.37% 1.91%
--------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003(c) $ 1 1.72%(e) 3.65%(e) 16.91%
Year Ended October 31, 2004 $ 984 1.66% 3.32% 0.00%
Year Ended October 31, 2005 $ 1,211 1.73% 2.91% 3.70%
Year Ended October 31, 2006 $ 1,207 1.70% 3.38% 1.91%
--------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $195,601 0.73% 4.74% 27.77%
Year Ended October 31, 2003 $184,774 0.72% 4.47% 16.91%
Year Ended October 31, 2004 $174,451 0.68% 4.35% 0.00%
Year Ended October 31, 2005 $162,139 0.72% 3.92% 3.70%
Year Ended October 31, 2006 $145,553 0.70% 4.37% 1.91%
--------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(c) For the period from September 4, 2003 (commencement of operations) through October 31, 2003.
(d) Not annualized.
(e) Annualized.
GARTMORE CORE FIXED INCOME SERIES | 53
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance during its last fiscal year)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920 or write to us at the address listed below, to request (1) additional copies free of charge or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. - 9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for closing share prices. Also, visit the Gartmore Funds' website at www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov,
o by electronic request to publicinfo@sec.gov,
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-CFX 2/07
CORE EQUITY Series
Gartmore Growth Fund
Gartmore Large Cap Value Fund
Gartmore Mid Cap Growth Fund
Gartmore Nationwide Fund
Gartmore Value Opportunities Fund
[LOGO] Gartmore Funds
Fund PROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
CORE EQUITY Series
Broad market portfolios featuring growth, value and blend styles designed to form the foundation of an asset allocation program.
FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore Growth Fund Class A NMFAX -------------------------------------------------------------------------------- Gartmore Growth Fund Class B NMFBX -------------------------------------------------------------------------------- Gartmore Growth Fund Class C GCGRX -------------------------------------------------------------------------------- Gartmore Growth Fund Class D MUIGX -------------------------------------------------------------------------------- Gartmore Growth Fund Class R GGFRX -------------------------------------------------------------------------------- Gartmore Growth Fund Institutional Class GGFIX -------------------------------------------------------------------------------- Gartmore Growth Fund Institutional Service Class GWISX -------------------------------------------------------------------------------- Gartmore Large Cap Value Fund Class A NPVAX -------------------------------------------------------------------------------- Gartmore Large Cap Value Fund Class B NLVBX -------------------------------------------------------------------------------- Gartmore Large Cap Value Fund Class C NLVAX -------------------------------------------------------------------------------- Gartmore Large Cap Value Fund Class R GLVRX -------------------------------------------------------------------------------- Gartmore Large Cap Value Fund Institutional Service Class NLVIX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Fund Class A GMCAX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Fund Class B GCPBX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Fund Class C GCPCX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Fund Class R GMCRX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Fund Institutional Class GMCGX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Fund Institutional Service Class n/a -------------------------------------------------------------------------------- Gartmore Nationwide Fund Class A NWFAX -------------------------------------------------------------------------------- Gartmore Nationwide Fund Class B NWFBX -------------------------------------------------------------------------------- Gartmore Nationwide Fund Class C GTRCX -------------------------------------------------------------------------------- Gartmore Nationwide Fund Class D MUIFX -------------------------------------------------------------------------------- Gartmore Nationwide Fund Class R GNWRX -------------------------------------------------------------------------------- Gartmore Nationwide Fund Institutional Class GNWIX -------------------------------------------------------------------------------- Gartmore Nationwide Fund Institutional Service Class GTISX -------------------------------------------------------------------------------- Gartmore Value Opportunities Fund Class A GVOAX -------------------------------------------------------------------------------- Gartmore Value Opportunities Fund Class B GVOBX -------------------------------------------------------------------------------- Gartmore Value Opportunities Fund Class C GVOCX -------------------------------------------------------------------------------- Gartmore Value Opportunities Fund Class R GVORX -------------------------------------------------------------------------------- Gartmore Value Opportunities Fund Institutional Class GVAIX -------------------------------------------------------------------------------- Gartmore Value Opportunities Fund Institutional Service Class GVOIX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND PERFORMANCE
Gartmore Growth Fund
Gartmore Large Cap Value Fund
Gartmore Mid Cap Growth Fund
Gartmore Nationwide Fund
Gartmore Value Opportunities Fund
24 SECTION 2: FUND DETAILS
Additional Information about Investments,
Investment Techniques and Risks
26 SECTION 3: FUND MANAGEMENT
Investment Adviser and Subadviser
Portfolio Management
Multi-Manager Structure
29 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
41 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and
Other Tax-Deferred Accounts
Backup Withholding
43 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE CORE EQUITY SERIES | 1
CORE EQUITY Series
INTRODUCTION TO THE CORE EQUITY SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT FIVE FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
Gartmore Growth Fund
Gartmore Large Cap Value Fund
Gartmore Mid Cap Growth Fund
Gartmore Nationwide Fund
Gartmore Value Opportunities Fund
THESE FUNDS ARE PRIMARILY INTENDED:
o to offer a selection of investment options using equity investments across a spectrum of market capitalizations.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
The Funds offer the following share classes:
o Class A
o Class B
o Class C
o Class R
o Institutional Service Class*
o Institutional Class**
* The Gartmore Mid Cap Growth Fund and the Gartmore Nationwide Fund currently do not offer Institutional Service Class Shares.
** The Gartmore Large Cap Value Fund currently does not offer Institutional Class shares.
The Gartmore Nationwide Fund and the Gartmore Growth Fund also offer Class D shares.
An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Each Fund may employ a "multi-manager" structure, which means that Gartmore Mutual Fund Capital Trust ("the Adviser") as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE CORE EQUITY SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMON STOCK - securities representing shares of ownership of a corporation.
EQUITY SECURITIES - securities including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts, that represent an ownership interest in the issuer.
GROWTH STYLE - a style of investing in equity securities of companies that the Fund's management believes have above-average rates of earnings growth and which therefore may experience above-average increases in stock price.
LARGE-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 1000(R) Index, ranging from $1.19 billion to $448.3 billion as of January 31, 2007.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
MID-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell Midcap(R) Index, ranging from $1.19 billion to $20.34 billion as of January 31, 2007.
QUANTITATIVE - mathematical and statistical methods used in the investment process to identify securities of issuers for possible purchase or sale by a Fund.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
TOTAL RETURN - investment return that reflects both capital appreciation or depreciation (increase or decrease in the market value of a security) and income (I.E., interest or dividends).
VALUE STYLE - a style of investing in equity securities that the Fund's management believes are undervalued, which means that their prices are less than Fund management believes they are worth, based on such factors as price-to-book ratio, price-to-earnings ratio and cash flow. Companies issuing such securities may be currently out of favor or experiencing poor operating conditions that Fund management believes to be temporary.
GARTMORE CORE EQUITY SERIES | 3
SECTION 1 GARTMORE GROWTH FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital growth.
PRINCIPAL STRATEGIES
The Fund invests primarily in COMMON STOCKS issued by LARGE-CAP COMPANIES, utilizing a GROWTH STYLE of investing. In other words, the Fund seeks companies whose earnings are expected to grow consistently faster than those of other companies. The portfolio managers use research to determine if particular industries and individual companies are well positioned for long-term growth in an effort to identify those that appear to have favorable long-term growth potential and the financial resources to capitalize on growth opportunities.
In selecting securities, the portfolio managers consider a range of factors relating to a particular company that include:
o financial strength;
o competitive position in its industry;
o projected future earnings;
o dividends and
o cash flow
The portfolio managers typically sell a company's securities if:
o earnings expectations or outlook for earnings deteriorate;
o their prices fail to increase as anticipated or become unusually volatile or
o more favorable opportunities are identified.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 1000(R) Growth Index, or other funds with similar investment objectives and strategies.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS D SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------ 26.20% 23.80% 16.60% -30.30% -27.70% -28.70% 32.40% 8.11% 6.55% 6.31% |
BEST QUARTER: 18.27% - 2ND QTR. OF 1997
WORST QUARTER: -28.00% - 1ST QTR. OF 2001
After-tax returns are shown in the table for Class D shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A shares - Before Taxes(2) -0.13% 1.53% -0.19%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(2) 0.29% 1.70% -0.44%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 4.29% 2.04% -0.04%
--------------------------------------------------------------------------------
Class D shares - Before Taxes 1.47% 2.09% 0.17%
--------------------------------------------------------------------------------
Class D shares - After Taxes
on Distributions 1.47% 2.08% -1.01%
--------------------------------------------------------------------------------
Class D shares - After Taxes
on Distributions and Sales of Shares 0.96% 1.79% 0.06%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 5.65% 2.73% 0.49%
--------------------------------------------------------------------------------
Institutional Service Class shares
- Before Taxes(2) 6.16% 3.04% 0.64%
--------------------------------------------------------------------------------
Institutional Class shares - Before Taxes(2) 6.18% 2.99% 0.61%
--------------------------------------------------------------------------------
Russell 1000 Growth Index(4) 9.07% 2.69% 5.44%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns through May 11, 1998 include the performance of the Fund's
predecessor fund. These returns were achieved prior to the creation of the
Class A and Class B shares (May 11, 1998). Returns between May 11, 1998
and the first offering of Class C shares (March 1, 2001), Class R shares
(October 1, 2003), Institutional Service Class shares (January 2, 2002)
and Institutional Class shares (June 29, 2004) are based on previous Class
D performance. Excluding the effect of certain fee waivers or
reimbursements, the prior performance is similar to what these classes
would have produced during those periods because all classes invest in the
same portfolio of securities. Performance for these classes has been
adjusted to reflect differences in sales charges, but not differing fees.
If these fees were reflected, performance for Class C and Class R shares
would have been lower. Institutional Service Class and Institutional Class
shares do not have any sales charges.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 The Russell 1000 Growth Index is an unmanaged index that measures the performance of the stocks of the companies in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE EQUITY SERIES | 5
SECTION 1 GARTMORE GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
-------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES INSTITUTIONAL (PAID DIRECTLY CLASS A CLASS B CLASS C CLASS D CLASS R SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES SHARES CLASS SHARES -------------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None 4.50%(2) None None None -------------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None None -------------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% -------------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% -------------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% None 0.50% None None -------------------------------------------------------------------------------------------------------------------------------- Other Expenses(7) 0.30% 0.20% 0.20% 0.20% 0.40% 0.20% 0.20% -------------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 1.15% 1.80% 1.80% 0.80% 1.50% 0.80% 0.80% -------------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A and Class D shares is reduced or
eliminated for purchases of $50,000 or more. For more information, see
Section 4, Investing with Gartmore Funds: Choosing a Share
Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.50% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 30 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class D, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class D, Class R and Institutional Service Class shares were 0.10%, 0.00%, 0.20% and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
6 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
This Example is intended to help you to 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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 685 $ 919 $ 1,172 $ 1,892
--------------------------------------------------------------------------------
Class B shares 683 866 1,175 1,865
--------------------------------------------------------------------------------
Class C shares 283 566 975 2,116
--------------------------------------------------------------------------------
Class D shares 528 694 874 1,395
--------------------------------------------------------------------------------
Class R shares 153 474 818 1,791
--------------------------------------------------------------------------------
Institutional Service Class shares 82 255 444 990
--------------------------------------------------------------------------------
Institutional Class shares 82 255 444 990
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 183 $ 566 $ 975 $ 1,865
--------------------------------------------------------------------------------
Class C shares 183 566 975 2,116
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class D, Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CORE EQUITY SERIES | 7
SECTION 1 GARTMORE LARGE CAP VALUE FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to maximize TOTAL RETURN, consisting of both capital appreciation and current income.
PRINCIPAL STRATEGIES
Under normal circumstances the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by LARGE-CAP COMPANIES, utilizing a VALUE STYLE of investing. In pursuing the Fund's objective, the portfolio managers compare securities of larger companies to others similarly situated, using some or all of the following factors, which the portfolio managers believe have predictive performance characteristics:
o earnings momentum;
o price momentum and
o price-to-economic value.
The portfolio managers further seek to minimize risk by investing in companies that possess characteristics similar to the companies in the Fund's benchmark, the Russell 1000(R) Value Index, which measures the performance of those Russell 1000(R) companies with lower price-to-book ratios and lower forecasted growth values.
The portfolio managers consider selling securities:
o if there are other more attractive securities available;
o if the business environment is changing or
o to control the overall risk of the Fund's portfolio.
The Adviser has chosen NorthPointe Capital, LLC ("NorthPointe") as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 1000(R) Value Index, or other funds with similar investment objectives and strategies.
VALUE STYLE RISK - over time, a value investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Value stocks as a group may be out of favor and underperform the overall equity market for a long period of time, while the market concentrates on "growth" stocks.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and, as a result, may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
8 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE LARGE CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1999 2000 2001 2002 2003 2004 2005 2006 --------------------------------------------------------------- -4.70% 15.40% -4.78% -13.79% 28.03% 15.88% 7.67% 21.04% |
BEST QUARTER: 16.30% - 2ND QTR. OF 2003
WORST QUARTER: -18.05% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (NOV. 2, 1998)
-----------------------------------------------------------------------------
Class A shares - Before Taxes 14.11% 9.45% 7.03%
-----------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 11.11% 8.56% 6.21%
-----------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares 11.73% 8.01% 5.84%
-----------------------------------------------------------------------------
Class B shares - Before Taxes 15.23% 9.81% 7.03%
-----------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 19.22% 10.08% 7.05%
-----------------------------------------------------------------------------
Class R shares - Before Taxes(2) 20.67% 10.44% 7.24%
-----------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes(4) 21.04% 10.76% 7.81%
-----------------------------------------------------------------------------
Russell 1000 Value Index(5) 22.25% 10.86% 8.63%
-----------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns before the first offering of Class C shares (March 1, 2001), and Class R shares (October 1, 2003), are based on the previous performance of Class B shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class C and Class R shares would have produced because all classes invest in the same portfolio of securities. Returns for these classes have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 These returns include the performance of the Fund's Institutional Class shares through March 5, 2002 (when all the prior shares were liquidated) and the Fund's Class A shares from March 6, 2002 through December 31, 2006. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Institutional Service Class shares would have produced because all classes invest in the same portfolio of securities. Returns for the Institutional Service Class have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
5 The Russell 1000 Value Index is an unmanaged index that measures the performance of the stocks of U.S. companies in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE EQUITY SERIES | 9
SECTION 1 GARTMORE LARGE CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID DIRECTLY INSTITUTIONAL SERVICE FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.75% 0.75% 0.75% 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 0.44% 0.31% 0.31% 0.51% 0.31% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES(8) 1.44% 2.06% 2.06% 1.76% 1.06% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.50% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 30 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.13%, 0.20% and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written agreement limiting operating expenses to 1.15% for each Class at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short sale-dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses" could increase to 1.65% for Class A, 1.90% for Class R and 1.40% for Institutional Service Class shares of the Fund before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
10 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE LARGE CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
-------------------------------------------------------------------------------
Class A shares* $ 713 $ 1,004 $ 1,317 $ 2,200
-------------------------------------------------------------------------------
Class B shares 709 946 1,308 2,157
-------------------------------------------------------------------------------
Class C shares 309 646 1,108 2,390
-------------------------------------------------------------------------------
Class R shares 179 554 954 2,073
-------------------------------------------------------------------------------
Institutional Service Class shares 108 337 585 1,294
-------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class B shares $ 209 $ 646 $ 1,108 $ 2,157
-------------------------------------------------------------------------------
Class C shares 209 646 1,108 2,390
-------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R and Institutional Service Class shares do not change, whether or not you sell your shares.
GARTMORE CORE EQUITY SERIES | 11
SECTION 1 GARTMORE MID CAP GROWTH FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by MID-CAP COMPANIES, utilizing a GROWTH STYLE of investing. In pursuing the Fund's objective, Fund management seeks "growth" companies that appear to be reasonably priced, using several of the following characteristics:
o consistent above-average earnings growth and superior forecasted growth versus the market;
o financial stability and strength;
o a healthy balance sheet;
o strong competitive advantage within a company's industry;
o positive investor sentiment;
o relative market value and
o strong management team.
The Fund may sell securities based on the following criteria:
o change in company fundamentals;
o cheaper attractive stocks become available or
o financial stability and strength weaken.
While the Fund may also sell a security if its MARKET CAPITALIZATION exceeds that of its benchmark range, it is not required to sell solely because of that fact.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
MID-CAP RISK stocks of mid-sized companies may be less stable in price and less liquid than those of larger, more established companies.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Russell Midcap(R) Growth Index, or other funds with similar investment objectives and strategies.
If the value of the Fund's investments goes down, you may lose money.
12 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE MID CAP GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - INSTITUTIONAL CLASS SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2003 2004 2005 2006 ---------------------------- 37.39% 14.73% 9.38% 9.83% |
BEST QUARTER: 20.91% - 2ND QTR. OF 2003
WORST QUARTER: -5.71% - 2ND QTR. OF 2006
After-tax returns are shown in the table for Institutional Class shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR (OCT. 1, 2002)
--------------------------------------------------------------------------------
Class A shares - Before Taxes(2) 3.21% 15.04%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(2) 3.70% 15.75%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 7.70% 16.04%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 9.10% 16.49%
--------------------------------------------------------------------------------
Institutional Service Class shares - Before
Taxes(2) 9.83% 16.94%
--------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 9.83% 16.94%
--------------------------------------------------------------------------------
Institutional Class shares - After Taxes
on Distributions 8.79% 16.08%
--------------------------------------------------------------------------------
Institutional Class shares - After
Taxes on Distributions and Sales of Shares 7.78% 14.70%
--------------------------------------------------------------------------------
Russell Midcap Growth Index(4) 10.66% 20.79%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns prior to the creation of Class A shares (March 5, 2003), Class B and Class C shares (August 21, 2003) and Class R shares (October 1, 2003) are based on the previous performance of Institutional Class shares. Returns for the Institutional Service Class shares through December 31, 2006 include performance of the Fund's Institutional Class because the Institutional Service Class has not yet commenced operations. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class A, Class B, Class C, Class R and Institutional Service Class shares would have produced because all classes invest in the same portfolio of securities. Returns for these classes have been adjusted to eliminate sales charges (where applicable), but have not been adjusted to reflect differing levels of other fees (primarily Rule 12b-1 and/or administrative services fees). If these fees were reflected, the performance for Class A, Class B, Class C, Class R and Institutional Service Class shares would have been lower.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 The Russell Midcap Growth Index is an unmanaged index of mid-capitalization growth stocks of U.S. companies in the Russell Midcap Index with higher price-to-book ratios and higher forecasted growth values. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE EQUITY SERIES | 13
SECTION 1 GARTMORE MID CAP GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY SERVICE INSTITUTIONAL
FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
------------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
------------------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee
(as a percentage of amount redeemed
or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
------------------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the
Fund's investments professionally
managed) 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
------------------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other
distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
------------------------------------------------------------------------------------------------------------------------------------
Other Expenses(7) 0.89% 0.86% 0.86% 1.06% 0.86% 0.86%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.89% 2.61% 2.61% 2.31% 1.61% 1.61%
------------------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/
Expense Reimbursement(8) 0.46% 0.46% 0.46% 0.46% 0.46% 0.46%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES
(AFTER WAIVERS/REIMBURSEMENTS) 1.43% 2.15% 2.15% 1.85% 1.15% 1.15%
------------------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A Contingent Deferred Sales Charge (CDSC) of up to 0.50% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.03%, 0.20% and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written agreement limiting operating expenses to 1.15% for all share classes at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.65% for Class A, 1.90% for Class R and 1.40% for Institutional Service Class shares of the Fund before the Adviser would be required to further limit the Fund's expenses.
14 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE MID CAP GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $712 $1,093 $1,497 $2,624
--------------------------------------------------------------------------------
Class B shares 718 1,068 1,544 2,652
--------------------------------------------------------------------------------
Class C shares 318 768 1,344 2,910
--------------------------------------------------------------------------------
Class R shares 188 677 1,194 2,610
--------------------------------------------------------------------------------
Institutional Service Class shares 117 463 833 1,872
--------------------------------------------------------------------------------
Institutional Class shares 117 463 833 1,872
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $218 $768 $1,344 $2,652
--------------------------------------------------------------------------------
Class C shares 218 768 1,344 2,910
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CORE EQUITY SERIES | 15
SECTION 1 GARTMORE NATIONWIDE FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks TOTAL RETURN through a flexible combination of capital appreciation and current income.
PRINCIPAL STRATEGIES
The Fund invests primarily in COMMON STOCKS and other EQUITY SECURITIES, using a multi-disciplined approach, which blends fundamental and QUANTITATIVE investment techniques. The portfolio managers emphasize fundamental analysis in managing some portions of the Fund; other portions of the Fund are subject to a more quantitative approach. The fundamental portions use both bottom-up qualitative research as well as quantitative inputs in constructing a core portfolio; the quantitative portion seeks to add to the Fund's performance while moderating its risk versus the Fund's benchmark. The portfolio managers integrate these portions to produce an overall core equity style, which they may opportunistically "tilt" slightly either in the direction of a GROWTH STYLE or a VALUE STYLE, depending on market circumstances. The portfolio managers seek to invest in companies with one or more of the following characteristics:
o above-average revenue growth;
o above-average earnings growth;
o consistent earnings growth and
o attractive valuation.
In seeking total return, the portfolio managers seek returns from both capital gains (i.e., an increase in the value of the stocks the Fund holds) as well as income generated by dividends paid by stock issuers. Over time, stock markets in general may produce proportionately higher capital gains relative to dividends, or vice versa, at different periods. While many of the stocks in which the Fund invests pay dividends, the portfolio managers anticipate that capital gains may constitute a somewhat higher proportion of returns than dividends under current market conditions. However, stock markets could change, either suddenly or gradually, so that over time a higher proportion of the Fund's returns would be derived from dividends.
The portfolio managers generally sell a company's securities if:
o the share price increases significantly;
o the earnings outlook becomes less attractive or
o more favorable opportunities are identified.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Standard & Poor's (S&P) 500(R) Index, or other funds with similar investment objectives and strategies.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
VALUE STYLE RISK - over time, a value investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Value stocks as a group may be out of favor and underperform the overall equity market for a long period of time, while the market concentrates on "growth" stocks.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and, as a result, may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
16 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE NATIONWIDE FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS D SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------ 39.60% 29.60% -0.20% -2.30% -11.90% -17.10% 26.71% 9.77% 7.36% 13.84% |
BEST QUARTER: 18.50% - 2ND QTR. OF 1997
WORST QUARTER: -18.79% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class D shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
---------------------------------------------------------------------------------
Class A shares - Before Taxes(2) 7.06% 5.62% 7.41%
---------------------------------------------------------------------------------
Class B shares - Before Taxes(2) 7.78% 5.84% 7.33%
---------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 11.76% 6.15% 7.64%
---------------------------------------------------------------------------------
Class D shares - Before Taxes 8.75% 6.18% 7.74%
---------------------------------------------------------------------------------
Class D shares - After Taxes on Distributions 5.81% 4.71% 5.81%
---------------------------------------------------------------------------------
Class D shares - After Taxes on Distributions
and Sales of Shares 7.17% 4.72% 6.00%
---------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 13.24% 6.90% 8.11%
---------------------------------------------------------------------------------
Institutional Service Class shares - Before
Taxes(2) 12.76% 6.15% 7.64%
---------------------------------------------------------------------------------
Institutional Class shares - Before Taxes(2) 14.02% 7.21% 8.27%
---------------------------------------------------------------------------------
S&P 500 Index(4) 15.79% 6.19% 8.42%
---------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns through May 11, 1998 include the performance of the Fund's
predecessor Fund. These returns were achieved prior to the creation of the
Class A and Class B shares (May 11, 1998). Returns between May 11, 1998
and the first offering of Class C shares (March 1, 2001), Class R shares
(October 1, 2003), Institutional Service Class shares (January 2, 2002)
and Institutional Class shares (June 29, 2004) are based on previous Class
D performance. The Institutional Service Class closed on February 10,
2005. From February 10, 2005 to the present, the Institutional Service
Class performance includes the returns for Class C shares. Excluding the
effect of certain fee waivers or reimbursements, the prior performance is
similar to what these classes would have produced during those periods
because all classes invest in the same portfolio of securities.
Performance for these classes has been adjusted to reflect differences in
sales charges, but not differing fees. If these fees were reflected,
performance for Class A, Class B, Class C and Class R shares would have
been lower. Institutional Service Class and Institutional Class shares do
not have any sales charges.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 The S&P 500 Index is an unmanaged market capitalization-weighted index of 500 widely held stocks of large-cap U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE EQUITY SERIES | 17
SECTION 1 GARTMORE NATIONWIDE FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
------------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES INSTITUTIONAL (PAID DIRECTLY SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS D SHARES CLASS R SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering 5.75%(2) None None 4.50%(2) None None None price) ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged) (6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 0.57% 0.57% 0.57% 0.57% 0.57% 0.57% 0.57% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% None 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 0.22% 0.19% 0.19% 0.23% 0.39% 0.19% 0.19% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 1.04% 1.76% 1.76% 0.80% 1.46% 0.76% 0.76% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A and Class D shares is reduced or
eliminated for purchases of $50,000 or more. For more information, see
Section 4, Investing with Gartmore Funds: Choosing a Share
Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.50% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 30 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class D, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class D, Class R and Institutional Service Class shares were 0.03%, 0.04%, 0.20% and 0.00%. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
18 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE NATIONWIDE FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $675 $887 $1,116 $1,773
--------------------------------------------------------------------------------
Class B shares 679 854 1,154 1,794
--------------------------------------------------------------------------------
Class C shares 279 554 954 2,073
--------------------------------------------------------------------------------
Class D shares 528 694 874 1,395
--------------------------------------------------------------------------------
Class R shares 149 462 797 1,746
--------------------------------------------------------------------------------
Institutional Service Class shares 78 243 422 942
--------------------------------------------------------------------------------
Institutional Class shares 78 243 422 942
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $179 $554 $954 $1,794
--------------------------------------------------------------------------------
Class C shares 179 554 954 2,073
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class D, Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CORE EQUITY SERIES | 19
SECTION 1 GARTMORE VALUE OPPORTUNITIES FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation through investment in COMMON STOCKS or their equivalent.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests primarily in EQUITY SECURITIES issued by SMALL-CAP COMPANIES that the Fund's management considers to be "value" companies. In pursuing a VALUE STYLE of investing, the Fund seeks securities of companies with good earnings growth potential that the portfolio managers believe the market has undervalued. These companies may be undervalued because:
o they are not well recognized;
o they may be experiencing special situations, such as acquisitions, mergers or other unusual developments or
o they may be experiencing significant business problems but have favorable prospects for recovery.
Small-cap companies often are undervalued because they may not be regularly researched by securities analysts or because institutional investors (who comprise a majority of the trading volume of publicly available securities) may be less interested due to the difficulty in purchasing a meaningful position that does not constitute a large percentage of the company's outstanding common stock. Consequently, greater discrepancies in the valuation of small-cap companies may at times result.
The Fund may invest in equity securities of MID-CAP COMPANIES, real estate investment trusts ("REITs"), and companies based either in the U.S. or in other countries.
The portfolio managers may sell a security:
o if there are more attractive securities available;
o if the business environment is changing or
o to control the overall risk of the portfolio.
The Adviser has chosen NorthPointe Capital, LLC ("NorthPointe") as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SMALL-CAP RISK - in general, stocks of small-cap companies trade in lower volumes and are subject to greater or more unpredictable price changes than stocks or large-cap companies or the market overall. Small-cap companies may have limited product lines or markets, be less financially secure than larger companies, or depend on a small number of key personnel. If adverse developments occur, such as due to management changes or product failure, the Fund's investment in a small-cap company may lose substantial value. Investing in small-cap companies requires a longer term investment view and may not be appropriate for all investors.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 2000(R) Index, or other funds with similar investment objectives and strategies.
SPECIAL SITUATION COMPANIES RISK - Special situation companies are companies that may be involved in acquisitions, consolidations, mergers, reorganizations or other unusual developments that can affect a company's market value. If the anticipated benefits of the developments do not ultimately materialize, the value of a special situation company may decline.
FOREIGN RISK - the risk that foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
VALUE STYLE RISK - over time, a value investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Value stocks as a group may be out of favor and underperform the overall equity market for a long period of time, while the market concentrates on "growth" stocks.
REIT RISK - the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds, and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
MID-CAP RISK - stocks of mid-sized companies may be less stable in price and less liquid than those of larger, more established companies.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
20 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE VALUE OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2000 2001 2002 2003 2004 2005 2006 ----------------------------------------------------- 31.52% 1.85% -14.36% 36.99% 13.40% 7.89% 17.84% |
BEST QUARTER: 18.51% - 2ND QTR. OF 2003
WORST QUARTER: -16.45% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (DEC. 29, 1999)
-----------------------------------------------------------------------------
Class A shares - Before Taxes 11.10% 9.73% 11.69%
-----------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 7.33% 7.53% 9.96%
-----------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares 8.54% 7.56% 9.57%
-----------------------------------------------------------------------------
Class B shares - Before Taxes 12.05% 10.02% 11.92%
-----------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 16.02% 10.29% 11.91%
-----------------------------------------------------------------------------
Class R shares - Before Taxes(2) 17.44% 10.62% 12.15%
-----------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 18.15% 11.28% 12.94%
-----------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) 18.15% 11.28% 12.94%
-----------------------------------------------------------------------------
Russell 2000 Index(5) 18.37% 11.39% 7.91%
-----------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns before the first offering of Class C shares (3/1/01) and Class R shares (12/30/03) are based on the previous performance of Class B shares. This performance is substantially similar to what Class C and Class R shares would have produced because all classes invest in the same portfolio of securities. Returns for Class C and Class R shares have been adjusted to eliminate sales charges that do not apply to those classes, but have not been adjusted to reflect any lower expenses.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for Institutional Class shares have not been adjusted to reflect its lower expenses.
5 The Russell 2000 Index is an unmanaged index that measures the performance of the stocks of small-capitalization U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CORE EQUITY SERIES | 21
SECTION 1 GARTMORE VALUE OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY SERVICE INSTITUTIONAL
FROM YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
------------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
------------------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee
(as a percentage of amount
redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
------------------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the
Fund's investments professionally
managed) 0.70% 0.70% 0.70% 0.70% 0.70% 0.70%
------------------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other
distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
------------------------------------------------------------------------------------------------------------------------------------
Other Expenses(7) 0.65% 0.64% 0.64% 0.84% 0.64% 0.64%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.60% 2.34% 2.34% 2.04% 1.34% 1.34%
------------------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/
Expense Reimbursement(8) 0.24% 0.24% 0.24% 0.24% 0.24% 0.24%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES
(AFTER WAIVERS/REIMBURSEMENTS) 1.36% 2.10% 2.10% 1.80% 1.10% 1.10%
------------------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.01%, 0.20%, and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.10% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/ Reimbursements)" could increase to 1.60% for Class A shares, 1.85% for Class R shares and 1.35% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
22 | GARTMORE CORE EQUITY SERIES
SECTION 1 GARTMORE VALUE OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only. (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $706 $1,029 $1,374 $2,347
--------------------------------------------------------------------------------
Class B shares 713 1,008 1,429 2,386
--------------------------------------------------------------------------------
Class C shares 313 708 1,229 2,658
--------------------------------------------------------------------------------
Class R shares 183 616 1,076 2,350
--------------------------------------------------------------------------------
Institutional Service Class shares 112 401 711 1,592
--------------------------------------------------------------------------------
Institutional Class shares 112 401 711 1,592
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $213 $708 $1,229 $2,386
--------------------------------------------------------------------------------
Class C shares 213 708 1,229 2,658
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CORE EQUITY SERIES | 23
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - Each of the Funds could lose value if the individual stocks in which it has invested and/or the overall stock markets on which the stocks trade decline in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
SMALL-CAP RISK - in general, stocks of small-cap companies trade in lower volumes and are subject to greater or more unpredictable price changes than stocks of large-cap companies or the market overall. Small-cap companies may have limited product lines or markets, be less financially secure than larger companies, or depend on a small number of key personnel. If adverse developments occur, such as due to management changes or product failure, the Fund's investment in a small-cap company may lose substantial value. Investing in small-cap companies requires a longer term investment view and may not be appropriate for all investors.
FOREIGN SECURITIES RISK - Foreign securities in which a Fund may invest may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities, the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
DEPOSITARY RECEIPTS - Certain Funds may invest in securities of foreign issuers in the form of depositary receipts, such as American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which typically are issued by local financial institutions and evidence ownership of the underlying securities. Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted.
Depositary receipts may or may not be jointly sponsored by the underlying issuer. The issuers of unsponsored depositary receipts are not obligated to disclose information that is considered material in the United States. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Certain depositary receipts are not listed on an exchange and therefore may be considered to be illiquid securities.
PREFERRED STOCK - a class of stock that often pays dividends at a specified rate and has preference over common stock in dividend payments and liquidation of assets. Preferred stock may be convertible into common stock.
CONVERTIBLE SECURITIES - generally debt securities or preferred stocks that may be converted into common stock. Convertibles typically pay current income as either interest (debt security convertibles) or dividends (preferred stocks). A convertible's value usually reflects both the stream of current income payments and the value of the underlying common stock. The market value of a convertible performs like that of a regular debt security, that is, if market interest rates rise, the value of a convertible usually falls. Since it is convertible into common stock, the convertible also has the same types of market and issuer risk as the underlying common stock.
WARRANTS - a security that gives its holder the right to buy common stock at a specified price for a specified period of time. Warrants are considered speculative and have no value if they are not exercised before their expiration date.
24 | GARTMORE CORE EQUITY SERIES
SECTION 2 FUND DETAILS (CONT.)
REIT RISK- the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds, and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
SECURITIES LENDING - Each of the Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances these events could trigger adverse tax consequences to a Fund.
PORTFOLIO TURNOVER - The Funds may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
TEMPORARY INVESTMENTS - Each of the Funds generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances, and interest-bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
GARTMORE CORE EQUITY SERIES | 25
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds.
NorthPointe Capital, LLC ("NorthPointe"), 101 West Big Beaver, Suite 745, Troy, Michigan 48084, was organized in 1999 and subadvises the Gartmore Large Cap Value Fund and the Gartmore Value Opportunities Fund, and manages several other mutual funds and institutional accounts. Subject to the supervision of the Adviser and the Trustees, NorthPointe will manage the assets of each of these Funds in accordance with its individual investment objective and strategies. NorthPointe makes investment decisions for these Funds and, in connection with such investment decisions, places buy and sell orders for securities.
The Adviser and NorthPointe are part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Funds' respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
In connection with the transactions proposed pursuant to the Purchase Agreement, the Board of Trustees of the Trust has also approved a new subadvisory agreement with NorthPointe with respect to the Gartmore Large Cap Value Fund and the Gartmore Value Opportunities Fund. The new subadvisory agreement with respect to the Gartmore Large Cap Value Fund and the Gartmore Value Opportunities Fund is identical to the existing subadvisory agreement in all material respects. At the same time, the Board of Trustees has approved the appointment of NorthPointe as the subadviser to the Gartmore Mid Cap Growth Fund. The portfolio management team that manages the Gartmore Mid Cap Growth Fund currently on behalf of the Adviser is also employed by NorthPointe. The appointment of NorthPointe as subadviser to the Gartmore Mid Cap Growth Fund, as well as the continued appointment of NorthPointe as subadviser to the Gartmore Large Cap Value Fund and Gartmore Value Opportunities Fund, are subject to the approval of the Funds' respective shareholders.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
Each Fund pays the Adviser a management fee based on each Fund's average daily net assets. With respect to the Gartmore Large Cap Value Fund and Gartmore Value Opportunities Fund, which are subadvised by NorthPointe, the Adviser pays NorthPointe a subadvisory fee from the management fee the Adviser collects from the Funds. The total management fee paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of each Fund's average daily net assets and taking into account any applicable waivers, was as follows:
-------------------------------------------------------------------------------
ACTUAL MANAGEMENT ACTUAL SUBADVISORY
FUND FEE PAID FEE PAID
-------------------------------------------------------------------------------
Gartmore Growth Fund 0.60% n/a
-------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 0.75% 0.35%
-------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 0.75% n/a
-------------------------------------------------------------------------------
Gartmore Nationwide Fund 0.57% n/a
-------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 0.70% 0.70%
-------------------------------------------------------------------------------
|
26 | GARTMORE CORE EQUITY SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
The total annual advisory fees that can be paid to each Fund's respective investment adviser and subadviser (as a percentage of average daily net assets) are as follows:
------------------------------------------------------------------------------ FUND/ASSETS MANAGEMENT FEE SUBADVISORY FEE ------------------------------------------------------------------------------ GARTMORE GROWTH FUND AND GARTMORE NATIONWIDE FUND ------------------------------------------------------------------------------ $0 up to $250 million 0.60% n/a ------------------------------------------------------------------------------ $250 million up to $1 billion 0.575% n/a ------------------------------------------------------------------------------ $1 billion up to $2 billion 0.55% n/a ------------------------------------------------------------------------------ $2 billion up to $5 billion 0.525% n/a ------------------------------------------------------------------------------ $5 billion or more 0.50% n/a ------------------------------------------------------------------------------ GARTMORE LARGE CAP VALUE FUND ------------------------------------------------------------------------------ Up to $100 million 0.75% 0.35% ------------------------------------------------------------------------------ $100 million or more 0.70% 0.30% ------------------------------------------------------------------------------ GARTMORE MID CAP GROWTH FUND ------------------------------------------------------------------------------ $0 up to $250 million 0.75% n/a ------------------------------------------------------------------------------ $250 million up to $1 billion 0.725% n/a ------------------------------------------------------------------------------ $1 billion up to $2 billion 0.70% n/a ------------------------------------------------------------------------------ $2 billion up to $5 billion 0.675% n/a ------------------------------------------------------------------------------ $5 billion or more 0.65% n/a ------------------------------------------------------------------------------ GARTMORE VALUE OPPORTUNITIES FUND ------------------------------------------------------------------------------ $0 up to $250 million 0.70% 0.70% ------------------------------------------------------------------------------ $250 million up to $1 billion 0.675% 0.675% ------------------------------------------------------------------------------ $1 billion up to $2 billion 0.65% 0.65% ------------------------------------------------------------------------------ $2 billion up to $5 billion 0.625% 0.625% ------------------------------------------------------------------------------ $5 billion or more 0.60% 0.60% ------------------------------------------------------------------------------ |
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory and subadvisory agreements for the Funds will be available in the Funds' semiannual report to shareholders, which will cover the period November 1, 2006 to April 30, 2007.
PORTFOLIO MANAGEMENT
GARTMORE GROWTH FUND
Senior Portfolio Manager Christopher Baggini and Portfolio Manager Douglas Burtnick are responsible for the Fund's day-to-day management and investment selection. They also co-manage the Gartmore U.S. Growth Leaders Fund, the Gartmore U.S. Growth Leaders Long-Short Fund, the Gartmore GVIT Growth Fund and the Gartmore GVIT U.S. Growth Leaders Fund. Mr. Burtnick also manages the Gartmore Global Financial Services Fund, the Gartmore Global Health Sciences Fund, the Gartmore GVIT Global Financial Services Fund and the Gartmore GVIT Health Sciences Fund.
Mr. Baggini joined the Adviser in March 2000. Prior to joining the Adviser, Mr. Baggini was a Portfolio Manager for Allied Investment Advisors from November 1996 to March 2000.
Mr. Burtnick joined the Adviser in May 2002 from Brown Brothers Harriman & Company where he served as a risk manager in the private client group and portfolio manager from 2000 to 2002. From 1998 to 2000, he worked at Barra, Inc., a risk management firm, where he led a group focused on portfolio construction and risk management issues for institutional investors and hedge funds.
GARTMORE LARGE CAP VALUE FUND
Peter J. Cahill is lead portfolio manager of Gartmore Large Cap Value Fund. Jeffrey C. Petherick and Mary C. Champagne assist Mr. Cahill in Management of the Fund. They also co-manage the Gartmore Value Opportunities Fund and the NorthPointe Small Cap Value Fund.
Mr. Cahill joined NorthPointe in January 2000. Previously, he was with Loomis, Sayles & Company L.P. from May 1997 to January 2000, as a director of quantitative research. Prior to May 1997, he was a quantitative researcher for Bank of America.
Mr. Petherick and Ms. Champagne joined NorthPointe in January 2000. Between June 1995 and January 2000, they co-managed institutional and retail small cap value equity investments at Loomis, Sayles & Company, L.P., including the Loomis Sayles Small Cap Value Fund.
GARTMORE NATIONWIDE FUND
Gary D. Haubold, lead manager, oversees the fundamentally managed portion of the Fund, and Joseph A. Cerniglia, co-portfolio manager, oversees the quantitatively managed portion of the Fund. Mr. Haubold and Mr. Cerniglia are responsible for the day-to-day management of the Fund, including selection of the Fund's investments. Mr. Haubold also manages or co-manages the Gartmore Nationwide Leaders Fund, the Gartmore Small Cap Fund, the Gartmore Small Cap Leaders Fund, the Gartmore GVIT Nationwide Fund and the Gartmore GVIT Nationwide Leaders Fund. Mr. Cerniglia also manages or co-manages the Gartmore Hedged Core Equity Fund, the Gartmore Market Neutral Fund, the Gartmore Small Cap Core Fund and the core quantitative portion of the Gartmore GVIT Nationwide Fund.
Mr. Haubold, CFA, Senior Portfolio Manager, has over 20 years of investment experience and joined the Adviser in December 2003 from Edge Capital Management, an equity hedge fund he founded in 2000. Between 1997 and 2000, he was the senior portfolio manager on several small-, mid- and large-cap value funds at Pilgrim Baxter and Associates. Prior to Pilgrim Baxter, Mr. Haubold was a senior portfolio manager at Miller Anderson & Sherrard, LLP, which is now part of Morgan Stanley Asset Management.
GARTMORE CORE EQUITY SERIES | 27
SECTION 3 FUND MANAGEMENT (CONT.)
Mr. Cerniglia, an Assistant Portfolio Manager and Senior Quantitative Analyst, assumed portfolio co-management responsibilities for the Fund on April 12, 2006. He joined the Adviser in September 2001 and has been responsible for developing and implementing quantitative investment strategies for the Adviser's range of equity funds. Prior to joining the Adviser, Mr. Cerniglia was an equity analyst at Pitcairn Trust Company.
GARTMORE MID CAP GROWTH FUND
Portfolio Manager Robert D. Glise, CFA, is responsible for the Fund's day-to-day management and investment selection. Mr. Glise joined the Adviser in April 2002. Previously, he was Senior Portfolio Manager and Partner of Munder Capital Management and portfolio manager of the Munder MidCap Select Fund as well as co-manager of the Munder Small Company Growth Fund. Prior to that, he was a portfolio manager for the Eaton Corporation from April 1993 to January 1998.
GARTMORE VALUE OPPORTUNITIES FUND
Jeffrey C. Petherick and Mary C. Champagne are jointly responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. They also co-manage the Gartmore Large Cap Value Fund and the NorthPointe Small Cap Value Fund.
Mr. Petherick and Ms. Champagne joined NorthPointe in January 2000. Between June 1995 and January 2000, they co-managed institutional and retail small cap value equity investments at Loomis, Sayles & Company, L.P., including the Loomis Sayles Small Cap Value Fund.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Gartmore Large Cap Value Fund and Gartmore Value Opportunities Fund are subadvised by NorthPointe, an affiliate of the Adviser, while each of the Gartmore Growth Fund, Gartmore Mid Cap Growth Fund and Gartmore Nationwide Fund are managed directly by the Adviser. If a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows the Funds greater flexibility enabling them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
28 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you,
o how long you expect to own your shares,
o how much you intend to invest,
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors and Class D shares, which are available only to certain investors.
Class R, Institutional Service Class and Institutional Class shares also are available only to certain investors. For eligible investors, Class R, Institutional Service Class and Institutional Class shares may be more suitable than Class A, Class D, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS D, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A AND
CLASS D SHARES
Front-end sales charge A front-end sales charge means that a portion of
up to 5.75% for Class A your initial investment goes toward the sales
shares and 4.50% for charge and is not invested.
Class D shares.
Contingent deferred Reduction and waivers of sales charges may be
sales charge (CDSC)(1) available.
(Class A shares only)
Annual service and/or Total annual operating expenses are lower than Class
12b-1 fee of 0.25% B and Class C expenses which means higher
(Class A shares only) dividends and/or net asset value ("NAV") per
Administrative services share.
fee up to 0.25%
|
No conversion feature.
No maximum investment amount.
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines 1% in most years to zero after six
years.
Annual service and/or Total annual operating expenses are higher than
12b-1 fee of 1.00% Class A expenses which means lower dividends
No administrative and/or NAV per share.
services fee
Automatic conversion to Class A shares after seven
years, which means lower annual expenses in the
future.
Maximum investment amount of $100,000. Larger
investments may be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are higher than
12b-1 fee of 1.00% Class A expenses which means lower dividends
No administrative and/or NAV per share.
services fee
No conversion feature.
Maximum investment amount of $1,000,000(2). Larger
investments may be rejected.
--------------------------------------------------------------------------------
|
1 Unless you are otherwise eligible to purchase Class A shares without a sales charge, a CDSC of up to 1.00% for the Gartmore Value Opportunities Fund and 0.50% for the other Funds will be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
GARTMORE CORE EQUITY SERIES | 29
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
Front-End Sales Charges for Class A Shares
-------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
-------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
-------------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
-------------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
-------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
-------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
-------------------------------------------------------------------------------
$1 million or more None None None*
-------------------------------------------------------------------------------
|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
CLASS D SHARES
Class D shares are available to the following:
o investors who received Class D shares of a Fund in the reorganization of Nationwide Investing Foundation, Nationwide Investing Foundation II and Financial Horizons Investment Trust into Gartmore Mutual Funds in May 1998, as long as you purchase the Class D shares through the same account in the same capacity.
o persons eligible to purchase Class D shares without a sales charge as described below and in the SAI.
FRONT-END SALES CHARGES FOR CLASS D SHARES
-------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
-------------------------------------------------------------------------------
Less than $ 50,000 4.50% 4.71% 4.00%
-------------------------------------------------------------------------------
$50,000 to $ 99,999 4.00 4.17 3.50
-------------------------------------------------------------------------------
$100,000 to $ 249,999 3.00 3.09 2.50
-------------------------------------------------------------------------------
$250,000 to $ 499,999 2.50 2.56 1.75
-------------------------------------------------------------------------------
$500,000 to $ 999,999 2.00 2.04 1.25
-------------------------------------------------------------------------------
$1 million to $ 24,999,999 0.50 0.50 0.50
-------------------------------------------------------------------------------
$25 million or more None None None
-------------------------------------------------------------------------------
|
REDUCTION AND WAIVER OF CLASS A AND CLASS D SALES CHARGES
If you qualify for a reduction or waiver of Class A or Class D sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries; and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent, and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A and Class D Sales Charges" and "Waiver of Class A and Class D Sales Charges" below and "Reduction of Class A and Class D Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A AND CLASS D SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A and Class D shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (as shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital
30 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchase of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
Front-end sales charges on Class A and Class D shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with the Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges. (Class A shares only);
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor. (Class A shares only);
o any investor who pays for shares with proceeds from redemptions of Gartmore Fund Class D shares if the new Fund does not offer Class D shares and Class A shares are purchased instead;
o retirement plans (Class A shares only);
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 0.50% (1.00% for Gartmore Value Opportunities Fund) applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason;
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES OF THE GARTMORE VALUE OPPORTUNITIES FUND
-------------------------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% -------------------------------------------------------------------------------- |
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN SALES OF CLASS A SHARES OF THE OTHER FUNDS
-------------------------------------------------------------------------------- AMOUNT OF 1 MILLION $25 MILLION PURCHASE TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 0.50% 0.25% -------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges--Class A, Class B, and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund(s) is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death
GARTMORE CORE EQUITY SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
-------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
-------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
-------------------------------------------------------------------------------
|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after you purchase them you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges--Class A, Class B, and Class C Shares" for a list of situations where a CDSC is not charged.
The Funds offer Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial service firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
32 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Fund(s) for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Fund(s) for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Fund;
o retirement plans for which no third-party administrator receives compensation from the Funds;
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative service fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or shareholder services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Class D, Institutional Class and Institutional Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
--------------------------------------------------------------------------------
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
|
ADMINISTRATIVE SERVICES FEES
Class A, Class D, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by these Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual administrative services fee of 0.25% for Class A, Class D, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class D, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
GARTMORE CORE EQUITY SERIES | 33
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
34 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS D, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' transfer agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
-----------------------------------------------------------------------------------------------------------------
HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED
PURCHASE. EACH FUND MAY REJECT ANY ORDER TO BUY UPON 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS.
SHARES AND MAY SUSPEND THE SALE OF SHARES AT
ANY TIME. ** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
-----------------------------------------------------------------------------------------------------------------
THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
has relationships with certain brokers and other relationships with certain brokers and other financial
financial intermediaries who are authorized to intermediaries who are authorized to accept purchase,
accept purchase, exchange and redemption orders for exchange and redemption orders for the Funds. Your
the Funds. Your transaction is processed at the NAV transaction is processed at the NAV next calculated
next calculated after the Funds' agent or an after the Funds' agent or an authorized intermediary
authorized intermediary receives your order in receives your order in proper form.
proper form.
-----------------------------------------------------------------------------------------------------------------
BY MAIL. Complete an application and send with a BY MAIL OR FAX. You may request an exchange or
check made payable to: Gartmore Funds. Payment must redemption by mailing or faxing a letter to Gartmore
be made in U.S. dollars and drawn on a U.S. bank. Funds. The letter must include your account number(s)
THE FUNDS DO NOT ACCEPT CASH, STARTER CHECKS, and the name(s) of the Fund(s) you wish to exchange
THIRD-PARTY CHECKS, TRAVELERS' CHECKS, CREDIT CARD from and to. The letter must be signed by all account
CHECKS OR MONEY ORDERS. owners. We reserve the right to request original
documents for any faxed requests.
-----------------------------------------------------------------------------------------------------------------
BY TELEPHONE. You will have automatic telephone BY TELEPHONE. You will have automatic telephone
privileges unless you decline this option on your privileges unless you decline this option on your
application. The Funds follow procedures to confirm application. The Funds follow procedures to confirm
that telephone instructions are genuine and will not that telephone instructions are genuine and will not be
be liable for any loss, injury, damage or expense liable for any loss, injury, damage or expense that
that results from executing such instructions. The results from executing such instructions. The Funds may
Funds may revoke telephone privileges at any time, revoke telephone privileges at any time, without notice
without notice to shareholders. to shareholders. For redemptions, shareholders who own
shares in an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed
to the address of record.
The Funds may record telephone instructions to redeem
shares and may request redemption instructions in
writing, signed by all shareholders on the account.
-----------------------------------------------------------------------------------------------------------------
ON-LINE. Transactions may be made through the ON-LINE. Transactions may be made through the Gartmore
Gartmore Funds' website. However, the Funds may Funds' website. However, the Funds may discontinue
discontinue on-line transactions of Fund shares at on-line transactions of Fund shares at any time.
any time.
-----------------------------------------------------------------------------------------------------------------
BY BANK WIRE. You may have your bank transmit funds BY BANK WIRE. The Funds can wire the proceeds of your
by federal funds wire to the Funds' custodian bank. redemption directly to your account at a commercial
(The authorization will be in effect unless you give bank. A voided check must be attached to your
the Funds written notice of its termination.) application. (The authorization will be in effect
unless you give the Fund written notice of its
o if you choose this method to open a new account, termination.)
you must call our toll-free number before you wire
your investment and arrange to fax your completed o your proceeds typically will be wired to your bank
application. on the next business day after your order has been
processed.
o your bank may charge a fee to wire funds.
o Gartmore Funds deducts a $20 service fee from the
o the wire must be received by 4:00 p.m. in order to redemption proceeds for this service.
receive the current day's NAV.
o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher
fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
-----------------------------------------------------------------------------------------------------------------
BY AUTOMATED CLEARING HOUSE (ACH). You can fund BY AUTOMATED CLEARING HOUSE (ACH). Your redemption
your Gartmore Funds' account with proceeds from your proceeds can be sent to your bank via ACH on the second
bank via ACH on the second business day after your business day after your order has been processed. A
purchase order has been processed. A voided check voided check must be attached to your application.
must be attached to your application. Money sent Money sent through ACH should reach your bank in two
through ACH typically reaches Gartmore Funds from business days. There is no fee for this service. (The
your bank in two business days. There is no fee for authorization will be in effect unless you give the
this service. (The authorization will be in effect Funds written notice of its termination.)
unless you give the Funds written notice of its ACH IS NOT AN OPTION FOR EXCHANGES.
termination.)
-----------------------------------------------------------------------------------------------------------------
RETIREMENT PLAN PARTICIPANTS should contact their RETIREMENT PLAN PARTICIPANTS should contact their
retirement plan administrator regarding retirement plan administrator regarding transactions.
transactions. Retirement plans or their Retirement plans or their administrators wishing to
administrators wishing to conduct transactions conduct transactions should call our toll-free number.
should call our toll-free number. Eligible entities Eligible entities or individuals wishing to conduct
or individuals wishing to conduct transactions in transactions in Institutional Service Class or
Institutional Service Class or Institutional Class Institutional Class shares should call our toll-free
shares should call our toll-free number. number.
|
GARTMORE CORE EQUITY SERIES | 35
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
36 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS D, CLASS B AND CLASS C SHARES To open an account $2,000 (per Fund) To open an IRA account $1,000 (per Fund) Additional investments $ 100 (per Fund) To start an Automatic Asset Accumulation Plan $1,000 (per Fund) Additional Investments (Automatic Asset Accumulation Plan) $ 50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or other financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
GARTMORE CORE EQUITY SERIES | 37
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund.)
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class D, Class B and Class C shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell, or in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or Gartmore Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
38 | GARTMORE CORE EQUITY SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or sales and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser and/or subadviser and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund also has implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you sell your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through certain intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
GARTMORE CORE EQUITY SERIES | 39
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Exchange and redemption fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability, and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70 1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 calendar days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose an exchange fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund with the exchange for less than the minimum holding period listed below:
--------------------------------------------------------------------------------
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and
Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
40 | GARTMORE CORE EQUITY SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee a Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gain distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099- DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
GARTMORE CORE EQUITY SERIES | 41
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gain distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
42 | GARTMORE CORE EQUITY SERIES
SECTION 6 GARTMORE GROWTH FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31 or, if a Fund or a class has not been in operation for five years, the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 5.89 (0.02) (1.13) (1.15)
Year Ended October 31, 2003 $ 4.74 (0.01) 1.19 1.18
Year Ended October 31, 2004 $ 5.92 (0.02) 0.18 0.16
Year Ended October 31, 2005 $ 6.08 (0.01) 0.63 0.62
Year Ended October 31, 2006 $ 6.69 (0.04) 0.55 0.51
--------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 5.54 (0.06) (1.04) (1.10)
Year Ended October 31, 2003 $ 4.44 (0.04) 1.11 1.07
Year Ended October 31, 2004 $ 5.51 (0.05) 0.15 0.10
Year Ended October 31, 2005 $ 5.61 (0.05) 0.59 0.54
Year Ended October 31, 2006 $ 6.15 (0.07) 0.50 0.43
--------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 5.55 (0.06) (1.05) (1.11)
Year Ended October 31, 2003 $ 4.44 (0.04) 1.11 1.07
Year Ended October 31, 2004 $ 5.51 (0.05) 0.16 0.11
Year Ended October 31, 2005 $ 5.62 (0.04) 0.58 0.54
Year Ended October 31, 2006 $ 6.16 (0.05) 0.47 0.42
--------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $ 5.94 (0.01) (1.14) (1.15)
Year Ended October 31, 2003 $ 4.79 - 1.21 1.21
Year Ended October 31, 2004 $ 6.00 -(j) 0.17 0.17
Year Ended October 31, 2005 $ 6.17 0.01 0.65 0.66
Year Ended October 31, 2006 $ 6.81 - 0.54 0.54
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
DISTRIBUTIONS
------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
-------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 - - $ 4.74 (19.52%)
Year Ended October 31, 2003 - - $ 5.92 24.89%
Year Ended October 31, 2004 - - $ 6.08 2.70%
Year Ended October 31, 2005 (0.01) (0.01) $ 6.69 10.22%
Year Ended October 31, 2006 - - $ 7.20 7.62%
-------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 - - $ 4.44 (19.86%)
Year Ended October 31, 2003 - - $ 5.51 24.10%
Year Ended October 31, 2004 - - $ 5.61 1.81%
Year Ended October 31, 2005 - - $ 6.15 9.63%
Year Ended October 31, 2006 - - $ 6.58 6.99%
-------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 - - $ 4.44 (20.00%)
Year Ended October 31, 2003 - - $ 5.51 24.10%
Year Ended October 31, 2004 - - $ 5.62 2.00%
Year Ended October 31, 2005 - - $ 6.16 9.61%
Year Ended October 31, 2006 - - $ 6.58 6.82%
-------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 - - $ 4.79 (19.36%)
Year Ended October 31, 2003 - - $ 6.00 25.26%
Year Ended October 31, 2004 -(j) - $ 6.17 2.87%
Year Ended October 31, 2005 (0.02) (0.02) $ 6.81 10.74%
Year Ended October 31, 2006 - - $ 7.35 7.93%
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO EXPENSES INCOME (LOSS)
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME (LOSS) MENTS) TO MENTS) TO
PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 4,828 1.17% (0.34%) (i) (i) 241.95%
Year Ended October 31, 2003 $ 6,529 1.13% (0.22%) (i) (i) 281.63%
Year Ended October 31, 2004 $ 30,641 1.19% (0.36%) (i) (i) 286.06%
Year Ended October 31, 2005 $ 29,467 1.34% (0.14%) (i) (i) 281.51%
Year Ended October 31, 2006 $ 12,816 1.15% (0.29%) 1.15% (0.29%) 284.67%
-------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 3,299 1.90% (1.08%) (i) (i) 241.95%
Year Ended October 31, 2003 $ 3,980 1.84% (0.93%) (i) (i) 281.63%
Year Ended October 31, 2004 $ 5,817 1.84% (1.00%) (i) (i) 286.06%
Year Ended October 31, 2005 $ 5,325 1.98% (0.78%) (i) (i) 281.51%
Year Ended October 31, 2006 $ 4,445 1.80% (0.94%) 1.80% (0.94%) 284.67%
-------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 52 1.90% (1.08%) (i) (i) 241.95%
Year Ended October 31, 2003 $ 101 1.84% (0.95%) (i) (i) 281.63%
Year Ended October 31, 2004 $ 248 1.84% (1.01%) (i) (i) 286.06%
Year Ended October 31, 2005 $ 550 2.03% (0.96%) (i) (i) 281.51%
Year Ended October 31, 2006 $ 777 1.77% (0.93%) 1.77% (0.93%) 284.67%
-------------------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $ 207,357 0.93% (0.10%) (i) (i) 241.95%
Year Ended October 31, 2003 $ 235,758 0.86% 0.05% (i) (i) 281.63%
Year Ended October 31, 2004 $ 216,843 0.85% (0.01%) (i) (i) 286.06%
Year Ended October 31, 2005 $ 202,682 0.99% 0.21% (i) (i) 281.51%
Year Ended October 31, 2006 $ 182,519 0.80% 0.05% 0.80% 0.05% 284.67%
-------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from January 2, 2002 (commencement of operations) through October 31, 2002.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(g) Not annualized.
(h) Annualized.
(i) There were no fee reductions during the period.
(j) The amount is less than $0.005.
(k) Net investment income (loss) is based on average shares outstanding during the period.
GARTMORE CORE EQUITY SERIES | 43
SECTION 6 GARTMORE GROWTH FUND FINANCIAL HIGHLIGHTS (CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
CLASS R SHARES
Period Ending October 31, 2003 (e) $ 5.76 (0.01) 0.25 0.24
Year Ended October 31, 2004 $ 6.00 (0.03) 0.18 0.15
Year Ended October 31, 2005 $ 6.15 (0.01) 0.64 0.63
Year Ended October 31, 2006 $ 6.77 (0.03) 0.53 0.50
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 6.59 (0.01) (1.79) (1.80)
Year Ended October 31, 2003 $ 4.79 - 1.22 1.22
Year Ended October 31, 2004 (k) $ 6.01 0.01 0.17 0.18
Year Ended October 31, 2005 $ 6.19 - 0.65 0.65
Year Ended October 31, 2006 $ 6.82 - 0.54 0.54
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) $ 6.34 - (0.17) (0.17)
Year Ended October 31, 2005 $ 6.17 - 0.65 0.65
Year Ended October 31, 2006 $ 6.80 - 0.54 0.54
---------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
DISTRIBUTIONS
-----------------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
-----------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ending October 31, 2003 (e) - - $ 6.00 4.17%(g)
Year Ended October 31, 2004 - - $ 6.15 2.50%
Year Ended October 31, 2005 (0.01) (0.01) $ 6.77 10.28%
Year Ended October 31, 2006 - - $ 7.27 7.39%
-----------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) - - $ 4.79 (27.31%)(g)
Year Ended October 31, 2003 - - $ 6.01 25.47%
Year Ended October 31, 2004 (k) -(j) - $ 6.19 3.03%
Year Ended October 31, 2005 (0.02) (0.02) $ 6.82 10.55%
Year Ended October 31, 2006 - - $ 7.36 7.92%
-----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) - - $ 6.17 (2.68%)(g)
Year Ended October 31, 2005 (0.02) (0.02) $ 6.80 10.59%
Year Ended October 31, 2006 - - $ 7.34 7.94%
-----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO EXPENSES INCOME (LOSS)
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME (LOSS) MENTS) TO MENTS) TO
PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ending October 31, 2003 (e) $ 1 1.42%(h) (0.76%)(h) 1.52%(h) 0.86%(h) 281.63%
Year Ended October 31, 2004 $ 1 1.29% (0.46%) (i) (i) 286.06%
Year Ended October 31, 2005 $ 1 1.29% (0.14%) (i) (i) 281.51%
Year Ended October 31, 2006 $ 1 1.28% (0.47%) 1.28% (0.47%) 284.67%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 59,307 0.88%(h) (0.11%)(h) (i) (i) 241.95%
Year Ended October 31, 2003 $ 75,002 0.84% 0.06% (i) (i) 281.63%
Year Ended October 31, 2004 (k) $ 1 0.84% 0.22% (i) (i) 286.06%
Year Ended October 31, 2005 $ 1 1.04% 0.11% (i) (i) 281.51%
Year Ended October 31, 2006 $ 1 0.80% 0.02% 0.80% 0.02% 284.67%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (f) $ 1 0.80%(h) (0.06%)(h) (i) (i) 286.06%
Year Ended October 31, 2005 $ 1 1.04% 0.11% (i) (i) 281.51%
Year Ended October 31, 2006 $ 1 0.79% 0.02% 0.79% 0.02% 284.67%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from January 2, 2002 (commencement of operations) through October 31, 2002.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(g) Not annualized.
(h) Annualized.
(i) There were no fee reductions during the period.
(j) The amount is less than $0.005.
(k) Net investment income (loss) is based on average shares outstanding during the period.
44 | GARTMORE CORE EQUITY SERIES
SECTION 6 GARTMORE LARGE CAP VALUE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9.98 0.08 (0.82) (0.74)
Year Ended October 31, 2003 $ 8.75 0.10 1.69 1.79
Year Ended October 31, 2004 $ 10.44 0.10 1.35 1.45
Year Ended October 31, 2005 $ 11.79 0.15 1.34 1.49
Year Ended October 31, 2006 $ 13.14 0.17 2.46 2.63
-------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 9.86 0.01 (0.80) (0.79)
Year Ended October 31, 2003 $ 8.64 0.03 1.67 1.70
Year Ended October 31, 2004 $ 10.30 0.03 1.33 1.36
Year Ended October 31, 2005 $ 11.63 0.06 1.33 1.39
Year Ended October 31, 2006 $ 12.96 0.07 2.43 2.50
-------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 9.85 0.01 (0.79) (0.78)
Year Ended October 31, 2003 $ 8.63 0.04 1.66 1.70
Year Ended October 31, 2004 $ 10.28 0.03 1.33 1.36
Year Ended October 31, 2005 $ 11.60 0.06 1.33 1.39
Year Ended October 31, 2006 $ 12.91 0.07 2.43 2.50
-------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 9.92 - 0.39 0.39
Year Ended October 31, 2004 $ 10.31 0.08 1.33 1.41
Year Ended October 31, 2005 $ 11.64 0.15 1.33 1.48
Year Ended October 31, 2006 $ 12.97 0.14 2.44 2.58
-------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.08) (0.41) (0.49) $ 8.75 (7.98%)
Year Ended October 31, 2003 (0.10) - (0.10) $ 10.44 20.57%
Year Ended October 31, 2004 (0.10) - (0.10) $ 11.79 13.92%
Year Ended October 31, 2005 (0.14) - (0.14) $ 13.14 12.63%
Year Ended October 31, 2006 (0.15) (0.60) (0.75) $ 15.02 20.81%
------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.02) (0.41) (0.43) $ 8.64 (8.53%)
Year Ended October 31, 2003 (0.04) - (0.04) $ 10.30 19.80%
Year Ended October 31, 2004 (0.03) - (0.03) $ 11.63 13.25%
Year Ended October 31, 2005 (0.06) - (0.06) $ 12.96 11.97%
Year Ended October 31, 2006 (0.06) (0.60) (0.66) $ 14.80 20.06%
------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (0.03) (0.41) (0.44) $ 8.63 (8.50%)
Year Ended October 31, 2003 (0.05) - (0.05) $ 10.28 19.77%
Year Ended October 31, 2004 (0.04) - (0.04) $ 11.60 13.25%
Year Ended October 31, 2005 (0.08) - (0.08) $ 12.91 11.98%
Year Ended October 31, 2006 (0.06) (0.60) (0.66) $ 14.75 20.11%
------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) - - - $ 10.31 3.93%(e)
Year Ended October 31, 2004 (0.08) - (0.08) $ 11.64 13.71%
Year Ended October 31, 2005 (0.15) - (0.15) $ 12.97 12.73%
Year Ended October 31, 2006 (0.14) (0.60) (0.74) $ 14.81 20.69%
------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-----------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 23,581 1.36% 0.81% 1.48% 0.69% 91.03%
Year Ended October 31, 2003 $ 24,800 1.39% 1.06% 1.47% 0.98% 77.28%
Year Ended October 31, 2004 $ 24,846 1.39% 0.91% 1.45% 0.84% 58.61%
Year Ended October 31, 2005 $ 28,232 1.44% 1.09% 1.47% 1.06% 67.00%
Year Ended October 31, 2006 $ 23,753 1.44% 1.14% 1.44% 1.14% 95.14%
-----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 576 2.02% 0.14% 2.17% (0.01%) 91.03%
Year Ended October 31, 2003 $ 751 2.00% 0.43% 2.08% 0.35% 77.28%
Year Ended October 31, 2004 $ 982 2.00% 0.29% 2.06% 0.22% 58.61%
Year Ended October 31, 2005 $ 1,342 2.06% 0.46% 2.08% 0.44% 67.00%
Year Ended October 31, 2006 $ 1,588 2.05% 0.52% 2.06% 0.51% 95.14%
-----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 80 2.03% 0.13% 2.15% 0.01% 91.03%
Year Ended October 31, 2003 $ 248 2.00% 0.38% 2.08% 0.30% 77.28%
Year Ended October 31, 2004 $ 743 2.00% 0.21% 2.06% 0.14% 58.61%
Year Ended October 31, 2005 $ 4,888 2.06% 0.34% 2.07% 0.34% 67.00%
Year Ended October 31, 2006 $ 5,966 2.06% 0.52% 2.06% 0.51% 95.14%
-----------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 1 1.60%(f) 0.48%(f) 2.06%(f) 0.02%(f) 77.28%
Year Ended October 31, 2004 $ 1 1.54% 0.75% 1.86% 0.42% 58.61%
Year Ended October 31, 2005 $ 1 1.33% 1.18% 1.38% 1.12% 67.00%
Year Ended October 31, 2006 $ 2 1.57% 1.00% 1.59% 0.98% 95.14%
-----------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) Not annualized.
(f) Annualized.
GARTMORE CORE EQUITY SERIES | 45
SECTION 6 GARTMORE MID CAP GROWTH FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
----------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
----------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2003 (d) (e) $ 9.88 (0.08) 4.04 3.96
Year Ended October 31, 2004 $ 13.84 (0.13) 0.87 0.74
Year Ended October 31, 2005 $ 14.21 (0.13) 2.16 2.03
Year Ended October 31, 2006 $ 15.55 (0.09) 2.12 2.03
----------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (e) (f) $ 13.17 (0.05) 0.72 0.67
Year Ended October 31, 2004 $ 13.84 (0.20) 0.84 0.64
Year Ended October 31, 2005 $ 14.11 (0.24) 2.15 1.91
Year Ended October 31, 2006 $ 15.33 (0.19) 2.07 1.88
----------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (f) $ 13.17 (0.05) 0.72 0.67
Year Ended October 31, 2004 $ 13.84 (0.23) 0.87 0.64
Year Ended October 31, 2005 $ 14.11 (0.27) 2.18 1.91
Year Ended October 31, 2006 $ 15.33 (0.18) 2.06 1.88
----------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (g) $ 13.08 (0.01) 0.79 0.78
Year Ended October 31, 2004 $ 13.86 (0.17) 0.86 0.69
Year Ended October 31, 2005 $ 14.18 (0.15) 2.17 2.02
Year Ended October 31, 2006 $ 15.51 (0.12) 2.11 1.99
----------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (h) $ 10.00 (0.01) 0.27 0.26
Year Ended October 31, 2003 $ 10.26 (0.09) 3.69 3.60
Year Ended October 31, 2004 $ 13.86 (0.10) 0.88 0.78
Year Ended October 31, 2005 $ 14.27 (0.07) 2.16 2.09
Year Ended October 31, 2006 $ 15.67 (0.05) 2.14 2.09
----------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------------------------
NET ASSET
NET REALIZED TOTAL REDEMPTION VALUE, END TOTAL
GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2003 (d) (e) - - - $ 13.84 40.08%(i)
Year Ended October 31, 2004 (0.37) (0.37) - $ 14.21 5.44%
Year Ended October 31, 2005 (0.69) (0.69) - $ 15.55 14.42%
Year Ended October 31, 2006 (0.84) (0.84) 0.01 $ 16.75 13.51%
--------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (e) (f) - - - $ 13.84 5.09%(i)
Year Ended October 31, 2004 (0.37) (0.37) - $ 14.11 4.70%
Year Ended October 31, 2005 (0.69) (0.69) - $ 15.33 13.65%
Year Ended October 31, 2006 (0.84) (0.84) 0.01 $ 16.38 12.68%
--------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (f) - - - $ 13.84 5.09%(i)
Year Ended October 31, 2004 (0.37) (0.37) - $ 14.11 4.70%
Year Ended October 31, 2005 (0.69) (0.69) - $ 15.33 13.65%
Year Ended October 31, 2006 (0.84) (0.84) 0.01 $ 16.38 12.68%
--------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (g) - - - $ 13.86 5.96%(i)
Year Ended October 31, 2004 (0.37) (0.37) - $ 14.18 5.06%
Year Ended October 31, 2005 (0.69) (0.69) - $ 15.51 14.38%
Year Ended October 31, 2006 (0.84) (0.84) 0.01 $ 16.67 13.27%
--------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (h) - - - $ 10.26 2.60%(i)
Year Ended October 31, 2003 - - - $ 13.86 35.09%
Year Ended October 31, 2004 (0.37) (0.37) - $ 14.27 5.73%
Year Ended October 31, 2005 (0.69) (0.69) - $ 15.67 14.79%
Year Ended October 31, 2006 (0.84) (0.84) 0.01 $ 16.93 13.80%
--------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2003 (d) (e) $ 522 1.40%(j) (1.02%)(j) 7.09%(j) (6.71%)(j) 74.46%
Year Ended October 31, 2004 $ 1,463 1.40% (0.98%) 2.51% (2.08%) 94.56%
Year Ended October 31, 2005 $ 1,678 1.42% (0.87%) 2.38% (1.84%) 68.86%
Year Ended October 31, 2006 $ 2,405 1.43% (0.60%) 1.89% (1.06%) 68.88%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2003 (e) (f) $ 18 2.15%(j) (1.82%)(j) 7.76%(j) (7.43%)(j) 74.46%
Year Ended October 31, 2004 $ 153 2.15% (1.74%) 3.27% (2.86%) 94.56%
Year Ended October 31, 2005 $ 173 2.15% (1.61%) 3.11% (2.56%) 68.86%
Year Ended October 31, 2006 $ 220 2.15% (1.31%) 2.62% (1.77%) 68.88%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (f) $ 1 2.15%(j) (1.87%)(j) 7.55%(j) (7.27%)(j) 74.46%
Year Ended October 31, 2004 $ 224 2.15% (1.72%) 3.17% (2.74%) 94.56%
Year Ended October 31, 2005 $ 230 2.15% (1.60%) 3.18% (2.64%) 68.86%
Year Ended October 31, 2006 $ 541 2.15% (1.34%) 2.60% (1.79%) 68.88%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (g) $ 1 1.75%(j) (1.54%)(j) 7.41%(j) (7.20%)(j) 74.46%
Year Ended October 31, 2004 $ 1 1.66% (1.27%) 2.63% (2.24%) 94.56%
Year Ended October 31, 2005 $ 1 1.49% (0.97%) 2.53% (2.00%) 68.86%
Year Ended October 31, 2006 $ 2 1.64% (0.79%) 2.18% (1.33%) 68.88%
-----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (h) $ 1,026 1.15%(j) (0.69%)(j) 20.62%(j) (20.16%)(j) 3.74%
Year Ended October 31, 2003 $ 1,384 1.15% (0.76%) 5.96% (5.56%) 74.46%
Year Ended October 31, 2004 $ 1,553 1.15% (0.72%) 2.26% (1.83%) 94.56%
Year Ended October 31, 2005 $ 2,531 1.15% (0.61%) 1.98% (1.43%) 68.86%
Year Ended October 31, 2006 $ 4,053 1.15% (0.34%) 1.61% (0.79%) 68.88%
-----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from March 5, 2003 (commencement of operations) through October 31, 2003.
(e) Net investment income (loss) is based on average shares outstanding during the period.
(f) For the period from August 21, 2003 (commencement of operations) through October 31, 2003.
(g) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(h) For the period from October 1, 2002 (commencement of operations) through October 31, 2002.
(i) Not annualized.
(j) Annualized.
46 | GARTMORE CORE EQUITY SERIES
SECTION 6 GARTMORE NATIONWIDE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 16.75 0.07 (1.68) (1.61)
Year Ended October 31, 2003 $ 15.06 0.09 3.02 3.11
Year Ended October 31, 2004 $ 18.08 0.07 0.87 0.94
Year Ended October 31, 2005 $ 18.96 0.38 1.86 2.24
Year Ended October 31, 2006 $ 20.94 0.18 2.61 2.79
--------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 16.40 (0.03) (1.65) (1.68)
Year Ended October 31, 2003 $ 14.72 - 2.94 2.94
Year Ended October 31, 2004 $ 17.65 (0.05) 0.86 0.81
Year Ended October 31, 2005 $ 18.46 0.03 2.01 2.04
Year Ended October 31, 2006 $ 20.32 0.05 2.52 2.57
--------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 16.40 (0.03) (1.65) (1.68)
Year Ended October 31, 2003 $ 14.72 (0.01) 2.95 2.94
Year Ended October 31, 2004 $ 17.65 (0.06) 0.87 0.81
Year Ended October 31, 2005 $ 18.45 0.04 1.99 2.03
Year Ended October 31, 2006 $ 20.30 0.04 2.53 2.57
--------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $ 16.64 0.13 (1.69) (1.56)
Year Ended October 31, 2003 $ 14.96 0.13 3.00 3.13
Year Ended October 31, 2004 $ 17.96 0.12 0.88 1.00
Year Ended October 31, 2005 $ 18.83 0.23 2.04 2.27
Year Ended October 31, 2006 $ 20.76 0.23 2.59 2.82
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 17.32 - 0.63 0.63
Year Ended October 31, 2004 $ 17.95 0.03 0.88 0.91
Year Ended October 31, 2005 $ 18.83 0.19 2.05 2.24
Year Ended October 31, 2006 $ 20.78 0.18 2.60 2.78
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) $ 19.00 0.03 (0.17) (0.14)
Year Ended October 31, 2005 $ 18.83 0.24 2.04 2.28
Year Ended October 31, 2006 $ 20.76 0.22 2.61 2.83
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.08) - (0.08) $ 15.06 (9.64%)
Year Ended October 31, 2003 (0.09) - (0.09) $ 18.08 20.74%
Year Ended October 31, 2004 (0.06) - (0.06) $ 18.96 5.22%
Year Ended October 31, 2005 (0.18) (0.08) (0.26) $ 20.94 11.88%
Year Ended October 31, 2006 (0.17) (2.81) (2.98) $ 20.75 14.65%
--------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 - - - $ 14.72 (10.24%)
Year Ended October 31, 2003 (0.01) - (0.01) $ 17.65 19.99%
Year Ended October 31, 2004 - - - $ 18.46 4.59%
Year Ended October 31, 2005 (0.10) (0.08) (0.18) $ 20.32 11.09%
Year Ended October 31, 2006 (0.03) (2.81) (2.84) $ 20.05 13.83%
--------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 - - - $ 14.72 (10.24%)
Year Ended October 31, 2003 (0.01) - (0.01) $ 17.65 20.00%
Year Ended October 31, 2004 (0.01) - (0.01) $ 18.45 4.58%
Year Ended October 31, 2005 (0.10) (0.08) (0.18) $ 20.30 11.04%
Year Ended October 31, 2006 (0.03) (2.81) (2.84) $ 20.03 13.89%
--------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 (0.12) - (0.12) $ 14.96 (9.43%)
Year Ended October 31, 2003 (0.13) - (0.13) $ 17.96 21.07%
Year Ended October 31, 2004 (0.13) - (0.13) $ 18.83 5.59%
Year Ended October 31, 2005 (0.26) (0.08) (0.34) $ 20.76 12.11%
Year Ended October 31, 2006 (0.22) (2.81) (3.03) $ 20.55 14.95%
--------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) - - - $ 17.95 3.64%(f)
Year Ended October 31, 2004 (0.03) - (0.03) $ 18.83 5.08%
Year Ended October 31, 2005 (0.21) (0.08) (0.29) $ 20.78 11.95%
Year Ended October 31, 2006 (0.17) (2.81) (2.98) $ 20.58 14.71%
--------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) (0.03) - (0.03) $ 18.83 (0.74%)(f)
Year Ended October 31, 2005 (0.27) (0.08) (0.35) $ 20.76 12.19%
Year Ended October 31, 2006 (0.23) (2.81) (3.04) $ 20.55 15.01%
--------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 362,435 1.14% 0.46% (h) (h) 25.51%
Year Ended October 31, 2003 $ 571,918 1.13% 0.57% (h) (h) 120.02%
Year Ended October 31, 2004 $ 447,884 1.10% 0.35% (h) (h) 144.61%
Year Ended October 31, 2005 $ 119,615 1.14% 1.64% (h) (h) 145.66%
Year Ended October 31, 2006 $ 117,938 1.04% 0.91% 1.04% 0.91% 245.80%
-------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 31,267 1.80% (0.18%) (h) (h) 25.51%
Year Ended October 31, 2003 $ 35,564 1.79% (0.06%) (h) (h) 120.02%
Year Ended October 31, 2004 $ 35,073 1.76% (0.30%) (h) (h) 144.61%
Year Ended October 31, 2005 $ 29,960 1.79% 0.25% (h) (h) 145.66%
Year Ended October 31, 2006 $ 20,455 1.76% 0.21% 1.76% 0.21% 245.80%
-------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 212 1.80% (0.20%) (h) (h) 25.51%
Year Ended October 31, 2003 $ 714 1.79% (0.16%) (h) (h) 120.02%
Year Ended October 31, 2004 $ 989 1.76% (0.32%) (h) (h) 144.61%
Year Ended October 31, 2005 $ 965 1.79% 0.27% (h) (h) 145.66%
Year Ended October 31, 2006 $ 866 1.75% 0.20% 1.75% 0.20% 245.80%
-------------------------------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $1,125,402 0.86% 0.77% (h) (h) 25.51%
Year Ended October 31, 2003 $1,240,520 0.85% 0.89% (h) (h) 120.02%
Year Ended October 31, 2004 $1,161,934 0.82% 0.64% (h) (h) 144.61%
Year Ended October 31, 2005 $1,132,192 0.85% 1.17% (h) (h) 145.66%
Year Ended October 31, 2006 $1,137,817 0.80% 1.14% 0.80% 1.14% 245.80%
-------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (d) $ 1 1.52%(g) 0.07%(g) 1.62%(g) (0.03%)(g) 120.02%
Year Ended October 31, 2004 $ 1 1.27% 0.16% (h) (h) 144.61%
Year Ended October 31, 2005 $ 1 0.96% 0.95% (h) (h) 145.66%
Year Ended October 31, 2006 $ 1 0.96% 0.93% 0.96% 0.93% 245.80%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) $ 341 0.78%(g) 0.54%(g) (h) (h) 144.61%
Year Ended October 31, 2005 $ 3,335 0.81% 0.81% (h) (h) 145.66%
Year Ended October 31, 2006 $ 10,226 0.74% 1.11% 0.74% 1.11% 245.80%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(e) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(f) Not annualized.
(g) Annualized.
(h) There were no fee reductions during the period.
GARTMORE CORE EQUITY SERIES | 47
SECTION 6 GARTMORE VALUE OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 12.17 0.05 (0.98) (0.93)
Year Ended October 31, 2003 $ 11.05 0.03 3.42 3.45
Year Ended October 31, 2004 $ 14.47 - 1.55 1.55
Year Ended October 31, 2005 $ 16.01 - 2.07 2.07
Year Ended October 31, 2006 $ 15.17 0.01 2.43 2.44
--------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 12.16 (0.03) (0.98) (1.01)
Year Ended October 31, 2003 $ 11.00 (0.06) 3.40 3.34
Year Ended October 31, 2004 $ 14.34 (0.11) 1.55 1.44
Year Ended October 31, 2005 $ 15.78 (0.10) 2.05 1.95
Year Ended October 31, 2006 $ 14.84 (0.09) 2.37 2.28
--------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 12.13 (0.03) (0.97) (1.00)
Year Ended October 31, 2003 $ 10.98 (0.04) 3.37 3.33
Year Ended October 31, 2004 $ 14.31 (0.09) 1.53 1.44
Year Ended October 31, 2005 $ 15.75 (0.10) 2.04 1.94
Year Ended October 31, 2006 $ 14.80 (0.09) 2.36 2.27
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 15.45 (0.05) 0.43 0.38
Year Ended October 31, 2005 $ 15.83 0.01 2.06 2.07
Year Ended October 31, 2006 $ 14.98 (0.01) 2.39 2.38
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2004 (e) $ 16.18 - (0.04) (0.04)
Year Ended October 31, 2005 $ 16.14 0.06 2.09 2.15
Year Ended October 31, 2006 $ 15.35 0.05 2.48 2.53
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL REDEMPTION VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.05) (0.15) (0.20) 0.01 $ 11.05 (7.75%)
Year Ended October 31, 2003 (0.03) - (0.03) - $ 14.47 31.32%
Year Ended October 31, 2004 (0.01) - (0.01) - $ 16.01 10.72%
Year Ended October 31, 2005 (0.02) (2.89) (2.91) - $ 15.17 13.59%
Year Ended October 31, 2006 - (2.11) (2.11) - $ 15.50 17.79%
---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.01) (0.15) (0.16) 0.01 $ 11.00 (8.39%)
Year Ended October 31, 2003 - - - - $ 14.34 30.39%
Year Ended October 31, 2004 - - - - $ 15.78 10.04%
Year Ended October 31, 2005 - (2.89) (2.89) - $ 14.84 12.90%
Year Ended October 31, 2006 - (2.11) (2.11) - $ 15.01 17.02%
---------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (0.01) (0.15) (0.16) 0.01 $ 10.98 (8.31%)
Year Ended October 31, 2003 - - - - $ 14.31 30.35%
Year Ended October 31, 2004 - - - - $ 15.75 10.06%
Year Ended October 31, 2005 - (2.89) (2.89) - $ 14.80 12.86%
Year Ended October 31, 2006 - (2.11) (2.11) - $ 14.96 16.99%
---------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - - - - $ 15.83 2.46%(f)
Year Ended October 31, 2005 (0.03) (2.89) (2.92) - $ 14.98 13.71%
Year Ended October 31, 2006 - (2.11) (2.11) - $ 15.25 17.59%
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2004 (e) - - - - $ 16.14 (0.19%)(f)
Year Ended October 31, 2005 (0.05) (2.89) (2.94) - $ 15.35 13.96%
Year Ended October 31, 2006 - (2.11) (2.11) - $ 15.77 18.21%
---------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9,766 1.31% 0.39% 1.48% 0.22% 108.62%
Year Ended October 31, 2003 $ 12,156 1.30% 0.20% 1.41% 0.09% 90.02%
Year Ended October 31, 2004 $ 12,244 1.36% (0.01%) 1.39% (0.04%) 146.98%
Year Ended October 31, 2005 $ 11,263 1.49% 0.02% 1.85% (0.34%) 187.36%
Year Ended October 31, 2006 $ 12,777 1.36% 0.09% 1.66% (0.21%) 151.61%
----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 2,362 1.98% (0.28%) 2.22% (0.52%) 108.62%
Year Ended October 31, 2003 $ 2,641 2.00% (0.49%) 2.12% (0.60%) 90.02%
Year Ended October 31, 2004 $ 2,631 2.01% (0.66%) 2.04% (0.69%) 146.98%
Year Ended October 31, 2005 $ 2,592 2.14% (0.64%) 2.50% (0.99%) 187.36%
Year Ended October 31, 2006 $ 2,600 2.04% (0.59%) 2.34% (0.90%) 151.61%
----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 133 1.99% (0.30%) 2.23% (0.54%) 108.62%
Year Ended October 31, 2003 $ 342 2.00% (0.56%) 2.09% (0.65%) 90.02%
Year Ended October 31, 2004 $ 652 2.01% (0.67%) 2.05% (0.71%) 146.98%
Year Ended October 31, 2005 $ 669 2.14% (0.62%) 2.51% (0.99%) 187.36%
Year Ended October 31, 2006 $ 668 2.04% (0.59%) 2.34% (0.89%) 151.61%
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 1.60%(g) (0.35%)(g) 1.64%(g) (0.39%)(g) 146.98%
Year Ended October 31, 2005 $ 1 1.61% 0.06% 1.99% (0.32%) 187.36%
Year Ended October 31, 2006 $ 1 1.50% (0.07%) 1.84% (0.41%) 151.61%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2004 (e) $ 1 1.09%(g) 0.09%(g) 1.17%(g) 0.01%(g) 146.98%
Year Ended October 31, 2005 $ 1 1.08% 0.39% 1.30% 0.17% 187.36%
Year Ended October 31, 2006 $ 1 1.07% 0.36% 1.36% 0.08% 151.61%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(e) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(f) Not annualized.
(g) Annualized.
48 | GARTMORE CORE EQUITY SERIES
CORE EQUITY Series
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. - 9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for closing share prices. Also, visit the Gartmore Funds' website at www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov;
o by electronic request to publicinfo@sec.gov;
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-CEQ 2/07
CONCEPT Series
Gartmore Hedged Core Equity Fund
Gartmore Market Neutral Fund
Gartmore U.S. Growth Leaders Long-Short Fund
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
FUND AND CLASS TICKER ------------------------------------------------------------------------------- Gartmore Hedged Core Equity Fund Class A GHEAX ------------------------------------------------------------------------------- Gartmore Hedged Core Equity Fund Class B GHEBX ------------------------------------------------------------------------------- Gartmore Hedged Core Equity Fund Class C GHECX ------------------------------------------------------------------------------- Gartmore Hedged Core Equity Fund Class R GHERX ------------------------------------------------------------------------------- Gartmore Hedged Core Equity Fund Institutional Class GHEIX ------------------------------------------------------------------------------- Gartmore Hedged Core Equity Fund Institutional Service Class GHESX ------------------------------------------------------------------------------- Gartmore Market Neutral Fund Class A GMNAX ------------------------------------------------------------------------------- Gartmore Market Neutral Fund Class B GMNBX ------------------------------------------------------------------------------- Gartmore Market Neutral Fund Class C GMNCX ------------------------------------------------------------------------------- Gartmore Market Neutral Fund Class R GMNRX ------------------------------------------------------------------------------- Gartmore Market Neutral Fund Institutional Class GMNIX ------------------------------------------------------------------------------- Gartmore Market Neutral Fund Institutional Service Class GMNSX ------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Long-Short Fund Class A MLSAX ------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Long-Short Fund Class B MLSBX ------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Long-Short Fund Class C MLSCX ------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Long-Short Fund Class R GLSRX ------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Long-Short Fund Institutional Class GGUIX ------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Long-Short Fund Institutional Service Class n/a -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND PERFORMANCE
Gartmore Hedged Core Equity Fund
Gartmore Market Neutral Fund
Gartmore U.S. Growth Leaders Long-Short Fund
17 SECTION 2: FUND DETAILS
Additional Information about Investments, Investment Techniques and Risks
19 SECTION 3: FUND MANAGEMENT
Investment Adviser
Portfolio Management
Multi-Manager Structure
21 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
33 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other Tax-Deferred Accounts
Backup Withholding
35 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE CONCEPT SERIES | 1
CONCEPT Series
INTRODUCTION TO THE CONCEPT SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT THREE FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
GARTMORE HEDGED CORE EQUITY FUND
GARTMORE MARKET NEUTRAL FUND
GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND
The Funds are primarily intended:
o to seek long-term capital appreciation regardless of market conditions through the purchase and short sale of securities.
THE FUNDS USE INVESTMENT STRATEGIES, SUCH AS SHORT SELLING, THAT MAY PRESENT HIGHER RISKS THAN OTHER MUTUAL FUNDS. THE FUNDS ARE NOT APPROPRIATE FOR ALL INVESTORS.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies and risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT THE FUNDS WILL MEET THEIR INVESTMENT OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME. THE FUNDS' INVESTMENT OBJECTIVES CAN BE CHANGED WITHOUT SHAREHOLDER APPROVAL.
A NOTE ABOUT SHARE CLASSES
Each Fund offers six different share classes--Class A, Class B, Class C, Class R, Institutional Class and Institutional Service Class. (The Gartmore U.S. Growth Leaders Long-Short Fund's Institutional Service Class has not commenced operations as of the date of this prospectus.) An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each Fund are set forth in the Fund Summaries.
Although each Fund is currently managed by Gartmore Mutual Fund Capital Trust (the "Adviser"), each Fund may employ a "multi-manager" structure, which means that the Adviser, as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE CONCEPT SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMON STOCK - securities representing shares of ownership of a corporation.
DERIVATIVE - a contract whose value is based on the performance of an underlying financial asset, index or economic measure.
EQUITY SECURITIES - securities including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts, that represent an ownership interest in the issuer.
GROWTH STYLE - a style of investing in equity securities of companies that the Fund's management believes have above-average rates of earnings growth and which therefore may experience above-average increases in stock price.
LARGE-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 1000(R) Index, ranging from $1.2 billion to $463.6 billion as of December 31, 2006.
LEVERAGE - using borrowed assets to make additional investments.
LONG POSITION - The Fund actually owns a security in anticipation that its price will increase.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
QUANTITATIVE TECHNIQUES - mathematical and statistical methods used in the investment process to identify securities of issuers for possible purchase or sale by a Fund.
SHORT SALE - selling a security the Fund does not own, but must borrow to complete the sale, in anticipation of purchasing the same security at a later date at a lower price.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
VALUE STYLE - a style of investing in equity securities that the Fund's management believes are undervalued, which means that their prices are less than Fund management believes they are worth, based on such factors as price-to-book ratio, price-to-earnings ratio and cash flow. Companies issuing such securities may be currently out of favor or experiencing poor operating conditions that Fund management believes to be temporary.
GARTMORE CONCEPT SERIES | 3
SECTION 1 GARTMORE HEDGED CORE EQUITY FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund will have both long and short positions in EQUITY SECURITIES, primarily COMMON STOCKS of LARGE-CAP COMPANIES that are organized under the laws of the United States, have their principal places of business in the United States, or whose stock is traded primarily in the United States. The Fund pursues a long/short strategy in which the Fund seeks to achieve long-term capital appreciation and lessen downside volatility by selling stock short to protect its unrealized gains in certain securities and/or to produce capital gains. The portfolio manager targets an allocation of 80-100% in LONG POSITIONS and 30-35% in SHORT SALES as a percentage of net assets, generally resulting in a target net (i.e., combined long and short) position of 65%.
The Fund seeks to capitalize on opportunities presented by changing market environments. The Adviser uses QUANTITATIVE TECHNIQUES incorporated into a multi-factor model that seeks to select the highest returning securities in the current market environment. This model attempts to capitalize on the theory that the financial markets are dynamic and investment opportunities vary over time. The Fund attempts to benefit from stock pricing anomalies based on various factors, such as:
o book-to-price ratio;
o earnings revisions;
o earnings quality;
o price momentum and
o cash flow changes through its purchase of long positions and short positions.
Portfolio optimization is used to build a risk controlled portfolio by buying the highest ranking stocks and shorting the lowest ranking stocks from the model while adhering to various risk constraints. The portfolio will generally be rebalanced on a monthly basis.
With a long position, the Fund purchases a stock outright; with a short position, the Fund sells a security that it does not own and must borrow to meet its settlement obligations. To complete the short-sale transaction, the Fund buys the same stock in the market and returns it to the lender. The Fund makes money if the market price of the stock goes down after the short sale. Conversely, if the price of the stock goes up after the short sale, the Fund will lose money because it will have to pay more to replace the borrowed stock than it received when it sold the stock short. Short positions may be used to hedge against the volatility of the long portion of the overall portfolio and/or to garner returns from declines in securities prices. The Fund may take long and short positions in the same sector/industry. While the Fund's securities may be held either long or short, no security will at the same time be held both long and short.
The Fund may also engage in securities lending in order to generate additional income. The Fund may also utilize DERIVATIVES, including options on futures, to hedge positions, LEVERAGE positions or generate income. In addition, the Fund may invest in exchange-traded funds.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments -- and therefore, the value of Fund shares -- may fluctuate. These changes may occur because of:
STOCK MARKET RISK - individual stocks, as well as stock markets overall, fluctuate in value considerably. The Fund could lose value if the stocks in which it maintains long positions go down, or if the stocks which the Fund sells short increase in value.
STRATEGY RISK - The strategy used by the Fund's portfolio manager may fail to produce the intended result. There is no guarantee that the use of long and short positions will succeed in limiting the Fund's exposure to stock market movements, capitalization, sector swings or other risk factors. The strategy used by the Fund's portfolio manager involves complex securities transactions that involve risks different from those involved with direct investment in equity securities. As a result, the Fund is intended for investors who are able to maintain their investment over a longer term and are willing to assume the risks associated with this type of fund.
SHORT SALES RISK - the risk that the price of the security sold short will increase in value between the time of the short sale and the time the Fund must purchase the security to return it to the lender.
LEVERAGE RISK - the use of leverage may exaggerate changes in the net asset value of Fund shares and thus result in increased volatility of returns. The amount that the Fund must repay may fluctuate due to market forces, and the Fund's assets that are used as collateral to secure the leverage may decrease in value during the time the leverage exposure is outstanding, which would require the Fund to use its other assets to make up a shortfall in the value of the collateral. Leverage will create interest and other expenses for the Fund which can exceed the income from the assets purchased with the leverage and thus reduce overall Fund returns.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
4 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE HEDGED CORE EQUITY FUND SUMMARY AND PERFORMANCE (CONT.)
SECURITIES LENDING RISK - the risk that the loaned securities may not be returned if the borrower or the lending agent defaults. The collateral is also subject to the risks of the securities in which it is invested.
EXCHANGE-TRADED FUNDS RISK - the risk associated with a particular exchange-traded fund (ETF) corresponds closely to the risk of the asset subclass the Fund is tracking. An ETF will perform well when the index it tracks is making gains, but may perform poorly when that index is falling. The Fund will also bear a pro rata portion of the ETF's expenses. In addition, some ETFs are more thinly traded than others, which could make it difficult to sell at the desired price, especially in a market downturn.
If the value of the Fund's investments goes down, you may lose money.
PERFORMANCE
Performance information is not provided because the Fund did not complete one full year of operations as of the date of this prospectus.
GARTMORE CONCEPT SERIES | 5
SECTION 1 GARTMORE HEDGED CORE EQUITY FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses that you may pay when buying and holding shares of the Fund depending on the share class you select.
---------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
---------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed upon
purchases (as a percentage of offering price) 5.75%(2) None None None None None
---------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a percentage of
offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
---------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee (as a percentage
of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
---------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
---------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed) 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
---------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1)
Fees (paid from Fund assets to cover the cost
of sales, promotions and other distribution
activities, as well as certain shareholder
servicing costs) 0.25% 1.00% 1.00% 0.50% None None
---------------------------------------------------------------------------------------------------------------------------
Other Expenses(7)
---------------------------------------------------------------------------------------------------------------------------
Short-Sale Dividend Expenses(8) 0.79% 0.79% 0.79% 0.79% 0.79% 0.79%
---------------------------------------------------------------------------------------------------------------------------
Remainder of Other Expenses 1.15% 1.15% 1.15% 1.35% 1.27% 1.15%
---------------------------------------------------------------------------------------------------------------------------
Total of Other Expenses 1.94% 1.94% 1.94% 2.14% 2.06% 1.94%
---------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 3.44% 4.19% 4.19% 3.89% 3.31% 3.19%
---------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense Reimbursement(9) 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
---------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES
(AFTER WAIVERS/REIMBURSEMENTS) 2.69% 3.44% 3.44% 3.14% 2.56% 2.44%
---------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1.00% will apply to certain redemptions of Class A shares if purchased without sales charges and for which a finder's fee was paid. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2.00% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.00%, 0.20% and 0.12%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 The Fund's principal investment strategies include selling securities short. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security ("short-sale dividend expense"), and this obligation must be disclosed as a Fund expense under "Total of Other Expenses" and "Total Annual Fund Operating Expenses." However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.65% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 2.94% for Class A shares, 3.19% for Class R shares and 2.69% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
6 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE HEDGED CORE EQUITY FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
-------------------------------------------------------------------------------
Class A shares* $831 $1,505
-------------------------------------------------------------------------------
Class B shares 847 1,505
-------------------------------------------------------------------------------
Class C shares 447 1,205
-------------------------------------------------------------------------------
Class R shares 317 1,118
-------------------------------------------------------------------------------
Institutional Service Class shares 259 949
-------------------------------------------------------------------------------
Institutional Class shares 247 913
-------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS
-------------------------------------------------------------------------------
Class B shares $347 $1,205
-------------------------------------------------------------------------------
Class C shares 347 1,205
-------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CONCEPT SERIES | 7
SECTION 1 GARTMORE MARKET NEUTRAL FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to provide long-term capital appreciation from a broadly diversified portfolio of U.S. stocks while neutralizing the general risks associated with stock market investing.
PRINCIPAL STRATEGIES
The Fund seeks to achieve its objective regardless of the direction of the market through the purchase and short sale of EQUITY SECURITIES of U.S. companies. The Fund takes LONG POSITIONS in COMMON STOCKS of companies that the Fund's management believes will outperform the market. Simultaneously, the Fund intends to engage in SHORT SALES of stocks that the portfolio manager believes will underperform the market and decline in value. The Fund uses a multi-cap and multi-style approach, meaning that it may invest across different industries, sectors and MARKET CAPITALIZATION levels, targeting both GROWTH STYLE and VALUE STYLE types of companies. The Fund attempts to maintain approximately equal dollar value exposure in its long and short positions (to the extent the market permits) in order to neutralize the effects on its performance resulting from general U.S. stock market movements or sector swings. By regulation, the current market value of the securities in which the Fund is short may not exceed the current market value of the Fund's long holdings of liquid securities and other liquid assets.
The Fund seeks to capitalize on opportunities presented by changing market environments. The Adviser uses QUANTITATIVE TECHNIQUES incorporated into a multi-factor model that seeks to select the highest returning securities in the current market environment. This model attempts to capitalize on the theory that the financial markets are dynamic and investment opportunities vary over time. The Fund attempts to benefit from stock pricing anomalies in various factors, such as:
o book-to-price;
o earnings revisions;
o earnings quality;
o price momentum and
o cash flow changes through its purchase of long positions and short positions.
With a long position, the Fund purchases a stock outright; with a short position, the Fund sells a security that it does not own and must borrow to meet its settlement obligations. To complete the short-sale transaction, the Fund buys the same stock in the market and returns it to the lender. The Fund makes money if the market price of the stock goes down after the short sale. Conversely, if the price of the stock goes up after the short sale, the Fund will lose money because it will have to pay more to replace the borrowed stock than it received when it sold the stock short. Short positions may be used to hedge against the volatility of the long portion of the overall portfolio and/or to garner returns from declines in securities prices.
While the Fund's securities may be held either long or short, no security will at the same time be held both long and short. Nevertheless, the Fund may effect strategic paired trades, taking both long and short positions in different companies within the same industry in order to remove much of the market and sector impact on performance.
The Fund may also utilize DERIVATIVES, including options on futures, to hedge positions, LEVERAGE positions or generate income, and may engage in securities lending in order to generate additional income.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments - and therefore, the value of Fund shares - may fluctuate. These changes may occur because of:
STOCK MARKET RISK - individual stocks, as well as stock markets overall, fluctuate in value considerably. The Fund could lose value if the stocks in which it maintains long positions go down, or if the stocks which the Fund sells short increase in value.
STRATEGY RISK - The strategy used by the Fund's portfolio manager may fail to produce the intended result. There is no guarantee that the use of long and short positions will succeed in limiting the Fund's exposure to stock market movements, capitalization, sector swings or other risk factors. The strategy used by the Fund's portfolio manager involves complex securities transactions that involve risks different from those involved with direct investment in equity securities. As a result, the Fund is intended for investors who are able to maintain their investment over a longer term and are willing to assume the risks associated with this type of fund.
SHORT SALES RISK - the risk that the price of the security sold short will increase in value between the time of the short sale and the time the Fund must purchase the security to return it to the lender.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
VALUE STYLE RISK - over time, a value investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Value stocks as a group may be out of favor and underperform the overall equity market for a long period of time while the market concentrates on "growth" stocks.
8 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE MARKET NEUTRAL FUND SUMMARY AND PERFORMANCE (CONT.)
LEVERAGE RISK - the use of leverage may exaggerate changes in the net asset value of Fund shares and thus result in increased volatility of returns. The amount that the Fund must repay may fluctuate due to market forces, and the Fund's assets that are used as collateral to secure the leverage may decrease in value during the time the leverage exposure is outstanding, which would require the Fund to use its other assets to make up a shortfall in the value of the collateral. Leverage will create interest and other expenses for the Fund which can exceed the income from the assets purchased with the leverage and thus reduce overall Fund returns.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
SECURITIES LENDING RISK - the risk that the loaned securities may not be returned if the borrower or the lending agent defaults. The collateral is also subject to the risks of the securities in which it is invested.
If the value of the Fund's investments goes down, you may lose money.
PERFORMANCE
Performance information is not provided because the Fund did not complete one full year of operations as of the date of this prospectus.
GARTMORE CONCEPT SERIES | 9
SECTION 1 GARTMORE MARKET NEUTRAL FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses that you may pay when buying and holding shares of the Fund depending on the share class you select.
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
-------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed upon
purchases (as a percentage of offering price) 5.75%(2) None None None None None
-------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) imposed
upon redemptions (as a percentage of offering
or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
-------------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee (as a percentage
of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
-------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
-------------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed) 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
-------------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1)
Fees (paid from Fund assets to cover the cost
of sales, promotions and other distribution
activities, as well as certain shareholder
servicing costs) 0.25% 1.00% 1.00% 0.50% None None
-------------------------------------------------------------------------------------------------------------------------------
Other Expenses(7)
-------------------------------------------------------------------------------------------------------------------------------
Short-Sale Dividend Expenses(8) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
-------------------------------------------------------------------------------------------------------------------------------
Remainder of Other Expenses 1.12% 1.12% 1.12% 1.32% 1.12% 1.12%
-------------------------------------------------------------------------------------------------------------------------------
Total of Other Expenses 3.12% 3.12% 3.12% 3.32% 3.12% 3.12%
-------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 4.62% 5.37% 5.37% 5.07% 4.37% 4.37%
-------------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense Reimbursement(9) 0.72% 0.72% 0.72% 0.72% 0.72% 0.72%
-------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES
(AFTER WAIVERS/REIMBURSEMENTS) 3.90% 4.65% 4.65% 4.35% 3.65% 3.65%
-------------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1.00% will apply to certain redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2.00% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.00%, 0.20% and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 The Fund's principal investment strategies include selling securities short. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security ("short-sale dividend expense"), and this obligation must be disclosed as a Fund expense under "Total of Other Expenses" and "Total Annual Fund Operating Expenses." However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.65% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 4.15% for Class A shares, 4.40% for Class R shares and 3.90% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
10 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE MARKET NEUTRAL FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS
-------------------------------------------------------------------------------
Class A shares* $945 $1,828
-------------------------------------------------------------------------------
Class B shares 966 1,840
-------------------------------------------------------------------------------
Class C shares 566 1,540
-------------------------------------------------------------------------------
Class R shares 436 1,456
-------------------------------------------------------------------------------
Institutional Service Class shares 367 1,259
-------------------------------------------------------------------------------
Institutional Class shares 367 1,259
-------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS
-------------------------------------------------------------------------------
Class B shares $466 $1,540
-------------------------------------------------------------------------------
Class C shares 466 1,540
-------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CONCEPT SERIES | 11
SECTION 1 GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
The Fund seeks to achieve its objective regardless of market conditions through the purchase and short sale of EQUITY SECURITIES of U.S. companies of any size. Under normal circumstances, the Fund will invest at least 80% of the value of its net assets in Leaders that are organized under the laws of the United States, have their principal places of business in the United States, or whose stock is traded primarily in the United States.
The Fund takes LONG POSITIONS in Leaders that the Fund's management believes will generate earnings growth exceeding market expectations. Simultaneously, the Fund intends to engage in SHORT SALES of stock of companies which the portfolio managers believe:
o have earnings that appear to be reflected in the current price;
o are likely to fall short of expectations;
o are in industries exhibiting structural weaknesses;
o have poor quality management or
o are likely to suffer an event affecting long-term earnings power.
With a long position, the Fund purchases a stock outright; with a short position, the Fund sells a security that it does not own and must borrow to meet its settlement obligations. In engaging in short sales, the Fund will profit or incur a loss depending on whether the value of the underlying stock decreases, as anticipated, or instead increases, between the time the stock is sold and when the Fund purchases its replacement.
In addition, the Fund may effect strategic paired trades, taking both long and short positions in companies in the same industry in order to remove much of the market and sector impact on performance.
While the Fund's securities may be held either long or short, no security will at the same time be held both long and short.
The Fund also may invest in exchange-traded funds and DERIVATIVES.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - individual stocks, as well as stock markets overall, fluctuate in value considerably. The Fund could lose value if the stocks in which it maintains long positions go down, or if the stocks which the Fund sells short increase in value.
STRATEGY RISK - The strategy used by the Fund's portfolio managers may fail to produce the intended result. There is no guarantee that the use of long and short positions will succeed in limiting the Fund's exposure to stock market movements, capitalization, sector swings or other risk factors. The strategy used by the Fund's portfolio managers involves complex securities transactions that involve risks different from those involved with direct investment in equity securities. As a result, the Fund is intended for investors who are able to maintain their investment over a longer term and are willing to assume the risks associated with this type of fund.
SHORT SALES RISK - the risk that the price of the security sold short will increase in value between the time of the short sale and the time the Fund must purchase the security to return it to the lender.
LEVERAGE RISK - the use of leverage may exaggerate changes in the net asset value of Fund shares and thus result in increased volatility of returns. The amount that the Fund must repay may fluctuate due to market forces, and the Fund's assets that are used as collateral to secure the leverage may decrease in value during the time the leverage exposure is outstanding, which would require the Fund to use its other assets to make up a shortfall in the value of the collateral. Leverage will create interest and other expenses for the Fund which can exceed the income from the assets purchased with the leverage and thus reduce overall Fund returns.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
SMALL- AND MID-CAP RISK - in general, stocks of small- and mid-cap companies may be more volatile and less liquid than larger company stocks.
12 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND SUMMARY AND PERFORMANCE
(CONT.)
EXCHANGE-TRADED FUNDS RISK - the risk associated with a particular exchange-traded fund (ETF) corresponds closely to the risk of the asset subclass the Fund is tracking. An ETF will perform well when the index it tracks is making gains, but may perform poorly when that index is falling. The Fund will also bear a pro rata portion of the ETF's expenses. In addition, some ETFs are more thinly traded than others, which could make it difficult to sell at the desired price, especially in a market downturn.
SECURITIES LENDING RISK - the risk that the loaned securities may not be returned if the borrower or the lending agent defaults. The collateral is also subject to the risks of the securities in which it is invested.
If the value of the Fund's investments goes down, you may lose money.
PERFORMANCE
The returns for the Fund reflect the performance of the Montgomery Partners Long-Short Equity Plus Fund (the "Predecessor Fund") until June 22, 2003 and the Fund from June 23, 2003 when the Fund acquired all of the assets, subject to stated liabilities, of the Predecessor Fund. During the joint history of the Predecessor Fund and the Fund, the assets have been managed with several different strategies and the returns reflect these various strategies. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
The bar chart and table following can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund.
ANNUAL TOTAL RETURNS - CLASS C SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1998 1999 2000 2001 2002 2003 2004 2005 2006 ----------------------------------------------------------------------- 41.98% 131.40% -25.05% -22.61% -17.47% 25.36% 4.49% 5.60% 5.67% |
BEST QUARTER: 59.92% - 4TH QTR OF 1999
WORST QUARTER: -22.95% - 2ND QTR OF 2000
GARTMORE CONCEPT SERIES | 13
SECTION 1 GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND SUMMARY AND PERFORMANCE
(CONT.)
After-tax returns are shown in the table for Class C shares only. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
1 YEAR 5 YEARS INCEPTION(2)
-----------------------------------------------------------------------------
Class A Shares - Before Taxes(3) 0.21% 3.35% 10.77%
-----------------------------------------------------------------------------
Class B Shares - Before Taxes(3) 0.56% 3.55% 11.09%
-----------------------------------------------------------------------------
Class C Shares - Before Taxes(4) 4.67% 3.82% 9.78%
-----------------------------------------------------------------------------
Class C Shares - After Taxes
on Distributions(4) 4.30% 1.02% 5.74%
-----------------------------------------------------------------------------
Class C Shares - After Taxes on
Distributions and Sales of Shares(4) 3.03% 1.58% 6.37%
-----------------------------------------------------------------------------
Class R Shares - Before Taxes(5) 5.77% 4.40% 11.39%
-----------------------------------------------------------------------------
Institutional Service Class Shares -
Before Taxes(6) 6.55% 4.72% 11.58%
-----------------------------------------------------------------------------
Institutional Class Shares -
Before Taxes(7) 6.55% 4.72% 11.58%
-----------------------------------------------------------------------------
Citigroup 3-Month
Treasury Bill Index(8) 4.76% 2.35% 2.35%
-----------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 The Predecessor Fund commenced operations for its Class C and Class R shares on December 31, 1997, and commenced operations for its Class A and Class B shares on October 31, 2001. As of June 23, 2003, the Fund (which previously had not commenced operations) acquired all the assets, subject to stated liabilities, of the Predecessor Fund. At that time the Fund took on the performance of the Predecessor Fund.
3 These returns through October 31, 2001 are based on the previous performance of the Class R shares of the Predecessor Fund, and, for periods from November 1, 2001 to June 22, 2003, the returns for the Class A and Class B shares are based on the previous performance of the Class A and Class B shares, respectively, of the Predecessor Fund. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class A and Class B shares of the Fund would have produced because all classes invest in the same portfolio of securities. The performance for these classes has been adjusted to reflect applicable sales charges, but have not been adjusted for the differing levels of fees applicable to Class A and Class B shares; if these fees were reflected, the performance for Class A and Class B shares would have been lower.
4 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the front-end sales charge.
5 These returns for the period through October 31, 2001 are based on the previous performance of the Predecessor Fund Class R shares; for the period from November 1, 2001 to June 22, 2003 are based on the previous performance of the Class B shares of the Predecessor Fund; and for the period from June 23, 2003 to February 26, 2004 (prior to the commencement of operations of the Class R shares) are based on the previous performance of the Fund's Class B shares. Excluding the effects of any fee waivers or reimbursements, such prior performance is similar to what Class R shares would have produced because all classes invest in the same portfolio of securities. Returns for Class R shares have been adjusted to eliminate sales charges that do not apply to that class but have not been adjusted to reflect its lower expenses.
6 These returns for the period through June 22, 2003 are based on the previous performance of the Predecessor Fund Class R shares; for the period from June 23, 2003 to June 28, 2004 are based on the previous performance of the Class A shares; and from June 29, 2004 to December 31, 2006 are based on the previous performance of the Institutional Class shares because Institutional Service Class shares have not yet commenced operations. Excluding the effects of any fee waivers or reimbursements, such prior performance is similar to what Institutional Service Class shares would have produced because all classes invest in the same portfolio of securities. Returns for Institutional Service Class shares have been adjusted to eliminate sales charges that do not apply to that class but have not been adjusted to reflect different expenses.
7 These returns for the period through June 22, 2003 are based on the previous performance of the Predecessor Fund Class R shares and for the period from June 23, 2003 to June 28, 2004 (prior to the commencement of operations of the Institutional Class) are based on the previous performance of the Class A shares. Excluding the effects of any fee waivers or reimbursements, such prior performance is similar to what Institutional Class shares would have produced because all classes invest in the same portfolio of securities. Returns for Institutional Class shares have been adjusted to eliminate sales charges that do not apply to that class but have not been adjusted to reflect its lower expenses.
8 The Citigroup 3-Month Treasury Bill Index is an unmanaged index that is generally representative of the average of the last 3-month Treasury bill issues (excluding the current month-end bills). The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
14 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND SUMMARY AND PERFORMANCE
(CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on which share class you select.
------------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL SERVICE INSTITUTIONAL YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed) 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) ------------------------------------------------------------------------------------------------------------------------------------ Short-Sale Dividend Expenses(8) 0.56% 0.56% 0.56% 0.56% 0.56% 0.56% ------------------------------------------------------------------------------------------------------------------------------------ Remainder of Other Expenses 0.28% 0.27% 0.27% 0.47% 0.27% 0.27% ------------------------------------------------------------------------------------------------------------------------------------ Total of Other Expenses 0.84% 0.83% 0.83% 1.03% 0.83% 0.83% ------------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver(9) 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 2.34% 3.08% 3.08% 2.78% 2.08% 2.08% ------------------------------------------------------------------------------------------------------------------------------------ Acquired Fund (Indirect Underlying Fund) Annual Operating Expenses(10) 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND ANNUAL OPERATING EXPENSES 2.42% 3.16% 3.16% 2.86% 2.16% 2.16% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1.00% will apply to
redemptions of Class A shares if purchased without sales charges and for
which a finders fee was paid. Section 4, Investing with Gartmore Funds:
Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2.00% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A and Class R shares were 0.01% and 0.20%, respectively. Administrative services fees for Institutional Service Class shares are estimated to be 0.00% for the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 The Fund's principal investment strategies include selling securities short. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security ("short-sale dividend expense"), and this obligation must be disclosed as a Fund expense under "Total of Other Expenses" and "Total Annual Fund Operating Expenses." However, any such dividend on a security sold short generally reduces the market value of the shorted security--thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract under which the Adviser has agreed to waive an amount equal to 0.25% from its management fee. Pursuant to a separate written contract, the Adviser has also agreed to limit the Fund's operating expenses to 1.65%. Both the waiver and the expense limitation run at least through February 28, 2008 and apply to all share classes. The expense limitation excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreements. If the maximum amount of administrative services fees were charged, the "Total Direct and Acquired Fund Annual Operating Expenses" could increase to 2.79% for Class A shares, 3.04% for Class R shares and 2.54% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
10 Reflects the Fund's investment in shares of one or more other investment companies, as permitted by the Fund's policies.
GARTMORE CONCEPT SERIES | 15
SECTION 1 GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND SUMMARY AND PERFORMANCE
(CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 806 $ 1,334 $ 1,888 $ 3,388
--------------------------------------------------------------------------------
Class B shares 819 1,325 1,953 3,433
--------------------------------------------------------------------------------
Class C shares 419 1,025 1,753 3,677
--------------------------------------------------------------------------------
Class R shares 289 936 1,609 3,403
--------------------------------------------------------------------------------
Institutional Service Class shares 219 728 1,263 2,727
--------------------------------------------------------------------------------
Institutional Class shares 219 728 1,263 2,727
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 319 $ 1,025 $ 1,753 $ 3,433
--------------------------------------------------------------------------------
Class C shares 319 1,025 1,753 3,677
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
16 | GARTMORE CONCEPT SERIES
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - Each Fund could lose value if the individual stocks in which it maintains long positions and/or the overall stock markets on which the stocks trade decline in price. In addition, the Funds could lose value if the individual stocks which they sell short increase in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or increase. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
SHORT SALES RISK - Each Fund may sell a security the Fund does not own in the hope of buying the same security at a later date at a lower price. The Fund is required to borrow the security to deliver it to the buyer and is obligated to return the security to the lender at a later date. Short sales involve the risk that the price of the security sold short increases from the time the security is sold short to the date the Fund purchases the security to replace the borrowed security. Any such loss is increased by the amount of the premium or interest the Fund must pay to the lender of the security. Likewise, any gain will be decreased by the amount of premium or interest the Fund must pay to the lender of the security. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security. However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction. The Fund is also required to segregate other assets on its books to cover its obligation to return the security to the lender which means that those other assets may not be available to meet the Fund's needs for immediate cash or other liquidity.
A Fund's performance may also suffer if it is required to close out a short position earlier than it had intended. This would occur if the securities lender required the Fund to deliver the securities the Fund borrowed prior to the end of the term of the short sale and the Fund was unable to borrow the securities from another securities lender.
DEPOSITARY RECEIPTS - Each Fund may invest in securities of foreign issuers in the form of depositary receipts, such as American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which typically are issued by local financial institutions and evidence ownership of the underlying securities. Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted.
Depositary receipts may or may not be jointly sponsored by the underlying issuer. The issuers of unsponsored depositary receipts are not obligated to disclose information that is considered material in the United States. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Certain depositary receipts are not listed on an exchange and therefore may be considered to be illiquid securities.
DERIVATIVES - Each Fund may invest in derivatives, which are contracts or investments with their values based on the performance of an underlying financial asset, index or other measure. For example, an option is a derivative because its value changes in relation to the performance of an underlying stock. The value of an option on a futures contract varies with the value of the underlying futures contract, which in turn varies with the value of the underlying commodity or security. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways. Some risks of investing in derivatives include:
o the other party to the derivatives contract may fail to fulfill its obligations;
o their use may reduce liquidity and make a Fund harder to value, especially in declining markets;
o a Fund may suffer disproportionately heavy losses relative to the amount invested and
o changes in the value of derivatives may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
GARTMORE CONCEPT SERIES | 17
SECTION 2 FUND DETAILS (CONT.)
SECURITIES LENDING - Each Fund may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances, these events could trigger adverse tax consequences to a Fund.
PORTFOLIO TURNOVER - The Funds may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
TEMPORARY INVESTMENTS - Each Fund generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Funds' management believes that business, economic, political or financial conditions warrant, each Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances, and interest- bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
18 | GARTMORE CONCEPT SERIES
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Funds' respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
The Funds pay the Adviser a management fee based on each Fund's average daily net assets. The total management fee paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of each Fund's average daily net assets and taking into account any applicable waivers, was as follows:
--------------------------------------------------------------------------------
ACTUAL MANAGEMENT
FUND FEE PAID
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 1.25%
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 1.25%
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Long-Short Fund 1.50%
--------------------------------------------------------------------------------
|
The total annual advisory fees that can be paid to the Adviser (as a percentage of each Fund's average daily net assets) are as follows:
-------------------------------------------------------------------------------- FUND/ASSETS MANAGEMENT FEE Gartmore Hedged Core Equity Fund and Gartmore Market Neutral Fund -------------------------------------------------------------------------------- All assets 1.25% -------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Long-Short Fund -------------------------------------------------------------------------------- Up to $250 million 1.50% -------------------------------------------------------------------------------- $250 million or more 1.25% -------------------------------------------------------------------------------- |
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreement for the Funds will be available in the semiannual report to shareholders for the Gartmore U.S. Growth Leaders Long-Short Fund, which will cover the period from November 1, 2006 to April 30, 2007, and currently appears in the annual report to shareholders for the Gartmore Hedged Core Equity Fund and the Gartmore Market Neutral Fund, which covers the period from September 29, 2006 (date of inception) through October 31, 2006.
PORTFOLIO MANAGEMENT
GARTMORE HEDGED CORE EQUITY FUND AND GARTMORE MARKET NEUTRAL FUND
Joseph A. Cerniglia, portfolio manager and senior quantitative analyst, is responsible for the day-to-day management of each Fund and the selection of each Fund's investments. He currently also manages or co-manages the Gartmore Small Cap Core Fund and the core quantitative portions of the Gartmore Nationwide Fund and the Gartmore GVIT Nationwide Fund.
Mr. Cerniglia joined the Adviser in September 2000 and has been responsible for developing and implementing quantitative investment strategies for NWD Investments' equity funds. Prior to joining NWD Investments, Mr. Cerniglia was an equity analyst at Pitcairn Trust Company where he was involved in both fundamental and quantitative research, including portfolio optimization routines, risk monitoring and enhanced valuation models.
GARTMORE CONCEPT SERIES | 19
SECTION 3 FUND MANAGEMENT (CONT.)
GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND
Christopher Baggini, senior portfolio manager, and Douglas Burtnick, portfolio manager, are responsible for the day-to-day management of the Fund and the selection of the Fund's investments. Mr. Baggini also manages or co-manages the Gartmore Growth Fund, the Gartmore U.S. Growth Leaders Fund, the Gartmore GVIT Growth Fund and the Gartmore GVIT U.S. Growth Leaders Fund. Mr. Burtnick also manages or co-manages the Gartmore Global Financial Services Fund, the Gartmore Global Health Sciences Fund, the Gartmore Growth Fund, the Gartmore U.S. Growth Leaders Fund, the Gartmore GVIT Global Financial Services Fund, the Gartmore GVIT Global Health Sciences Fund, the Gartmore GVIT Growth Fund and the Gartmore GVIT U.S. Growth Leaders Fund.
Mr. Baggini joined the Adviser in March 2000. Prior to joining NWD Investments, he was a Portfolio Manager for Allied Investment Advisors from November 1996 to March 2000.
Mr. Burtnick joined the Adviser in May 2002 from Brown Brothers Harriman & Company where he served as a risk manager in the private client group and portfolio manager from 2000 to 2002. From 1998 to 2000, he worked at Barra, Inc., a risk management firm, where he led a group focused on portfolio construction and risk management issues for institutional investors and hedge funds.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are managed by the Adviser, but if a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows the Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
20 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class shares and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES
Front-end sales charge A front-end sales charge means that a portion of
up to 5.75% your initial investment goes toward the sales
charge and is not invested.
Contingent deferred sales Reduction and waivers of sales charges may be
charge (CDSC)(1) available.
Annual service and/or Total annual operating expenses are lower
12b-1 fee of 0.25% than Class B and Class C expenses which
Administrative services means higher dividends and/or net asset
fee up to 0.25% value ("NAV") per share.
No conversion feature.
No maximum investment amount.
--------------------------------------------------------------------------------
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full
investment immediately goes toward
buying shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines 1% in most years to zero
after six years.
Annual service and/or Total annual operating expenses are higher than
12b-1 fee of 1.00% Class A expenses which means lower dividends
No administrative and/or NAV per share.
services fee
Automatic conversion to Class A shares
after seven years, which means lower
annual expenses in the future.
Maximum investment amount of $100,000.
Larger investments may be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full
investment immediately goes toward
buying shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are higher
12b-1 fee of 1.00% than Class A expenses which means lower
No administrative dividends and/or NAV per share.
services fee
No conversion feature.
Maximum investment amount of $1,000,000(2). Larger
investments may be rejected.
--------------------------------------------------------------------------------
|
1 Unless you are eligible to purchase Class A shares without a sales charge, a CDSC of up to 1.00% may be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
GARTMORE CONCEPT SERIES | 21
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
---------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
---------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
---------------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
---------------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
---------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
---------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
---------------------------------------------------------------------------------
$1 million or more None None None*
---------------------------------------------------------------------------------
|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchase of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
22 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker- dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 1.00% applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason;
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN
REDEMPTIONS OF CLASS A SHARES
-------------------------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% -------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund(s) is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
GARTMORE CONCEPT SERIES | 23
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
----------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
----------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
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|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after you purchase them you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The Funds offer Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires,
o the total expenses of the share class and
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial service firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
24 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Fund;
o retirement plans for which no third-party administrator receives compensation from the Fund(s);
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Institutional Class and Institutional Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
--------------------------------------------------------------------------------
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
|
ADMINISTRATIVE SERVICES FEES
Class A, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by the Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
GARTMORE CONCEPT SERIES | 25
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
26 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED
PURCHASE. EACH FUND MAY REJECT ANY ORDER TO BUY UPON 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS.
SHARES AND MAY SUSPEND THE OFFERING OF SHARES AT ANY
TIME. ** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
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THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
has relationships with certain brokers and other relationships with certain brokers and other financial
financial intermediaries who are authorized to intermediaries who are authorized to accept purchase,
accept purchase, exchange and redemption orders for exchange and redemption orders for the Funds. Your
the Funds. Your transaction is processed at the NAV transaction is processed at the NAV next calculated after
next calculated after the Funds' agent or an the Funds' agent or an authorized intermediary receives
authorized intermediary receives your order in your order in proper form.
proper form.
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BY MAIL. Complete an application and send with a BY MAIL OR FAX. You may request an exchange or redemption
check made payable to: Gartmore Funds. Payment must by mailing or faxing a letter to Gartmore Funds. The
be made in U.S. dollars and drawn on a U.S. bank. letter must include your account number(s) and the name(s)
THE FUNDS DO NOT ACCEPT CASH, STARTER CHECKS, of the Fund(s) you wish to exchange from and to. The
THIRD-PARTY CHECKS, TRAVELERS' CHECKS, CREDIT CARD letter must be signed by all account owners. We reserve
CHECKS OR MONEY ORDERS. the right to request original documents for any faxed
requests.
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BY TELEPHONE. You will have automatic telephone BY TELEPHONE. You will have automatic telephone privileges
privileges unless you decline this option on your unless you decline this option on your application. The
application. The Funds follow procedures to confirm Funds follow procedures to confirm that telephone
that telephone instructions are genuine and will instructions are genuine and will not be liable for any
not be liable for any loss, injury, damage or loss, injury, damage or expense that results from
expense that results from executing such executing such instructions. The Funds may revoke
instructions. The Funds may revoke telephone telephone privileges at any time, without notice to
privileges at any time, without notice to shareholders. For redemptions, shareholders who own shares
shareholders. in an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed to
the address of record.
The Funds may record telephone instructions to redeem
shares. and may request redemption instructions in
writing, signed by all shareholders on the account.
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ON-LINE. Transactions may be made through the ON-LINE. Transactions may be made through the Gartmore
Gartmore Funds' website. However, the Funds may Funds' website. However, the Funds may discontinue on-line
discontinue on-line transactions of Fund shares at transactions of Fund shares at any time.
any time.
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BY BANK WIRE. You may have your bank transmit funds BY BANK WIRE. The Funds can wire the proceeds of your
by federal funds wire to the Funds' custodian bank. redemption directly to your account at a commercial bank.
(The authorization will be in effect unless you A voided check must be attached to your application. (The
give the Funds written notice of its termination.) authorization will be in effect unless you give the Fund
written notice of its termination.)
o if you choose this method to open a new
account, you must call our toll-free number o your proceeds typically will be wired to your bank
before you wire your investment and arrange to on the next business day after your order has been
fax your completed application. processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the
redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in
order to receive the current day's NAV. o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher
fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund BY AUTOMATED CLEARING HOUSE (ACH). Your redemption
your Gartmore Funds' account with proceeds from proceeds can be sent to your bank via ACH on the second
your bank via ACH on the second business day after business day after your order has been processed. A voided
your purchase order has been processed. A voided check must be attached to your application. Money sent
check must be attached to your application. Money through ACH should reach your bank in two business days.
sent through ACH typically reaches Gartmore Funds There is no fee for this service. (The authorization will
from your bank in two business days. There is no be in effect unless you give the Funds written notice of
fee for this service. (The authorization will be in its termination.)
effect unless you give the Funds written notice of
its termination.) ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their RETIREMENT PLAN PARTICIPANTS should contact their
retirement plan administrator regarding retirement plan administrator regarding transactions.
transactions. Retirement plans or their Retirement plans or their administrators wishing to
administrators wishing to conduct transactions conduct transactions should call our toll-free number.
should call our toll-free number. Eligible entities Eligible entities or individuals wishing to conduct
or individuals wishing to conduct transactions in transactions in Institutional Service Class or
Institutional Service Class or Institutional Class Institutional Class shares should call our toll-free
shares should call our toll-free number. number.
|
GARTMORE CONCEPT SERIES | 27
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
28 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS B AND CLASS C SHARES To open an account $2,000 (per Fund) To open an IRA account $1,000 (per Fund) Additional investments $100 (per Fund) To start an Automatic Asset Accumulation Plan $1,000 (per Fund) Additional investments (Automatic Asset Accumulation Plan) $50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60-day written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund).
GARTMORE CONCEPT SERIES | 29
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new share class. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell or, in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or Gartmore Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
30 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or sales and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
GARTMORE CONCEPT SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70-1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund for less than the minimum holding period listed below:
--------------------------------------------------------------------------------
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology
and Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
32 | GARTMORE CONCEPT SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee a Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gain distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
GARTMORE CONCEPT SERIES | 33
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in the Funds through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gain distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
34 | GARTMORE CONCEPT SERIES
SECTION 6 GARTMORE HEDGED CORE EQUITY FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31 or, if a Fund or a class has not been in operation for the past five years, for the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are included in the Trust's annual report, which is available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED NET ASSETS
VALUE, INVESTMENT GAINS TOTAL FROM NET ASSET AT END OF
BEGINNING INCOME (LOSSES) ON INVESTMENT VALUE, END TOTAL PERIOD
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES OF PERIOD RETURN (a) (000S)
---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006 (e) $10.00 -(f) 0.25 0.25 $ 10.25 2.50%(g) $ 1
---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006 (e) $10.00 (0.01) 0.25 0.24 $ 10.24 2.40%(g) $ 1
---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006 (e) $10.00 (0.01) 0.25 0.24 $ 10.24 2.40%(g) $ 1
---------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006 (e) $10.00 -(f) 0.24 0.24 $ 10.24 2.40%(g) $ 1
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006 (e) $10.00 -(f) 0.25 0.25 $ 10.25 2.50%(g) $ 1
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2006 (e) $10.00 -(f) 0.25 0.25 $ 10.25 2.50%(g) $ 5,124
---------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF RATIO RATIO OF INVESTMENT
EXPENSES OF NET EXPENSES INCOME (LOSS)
TO AVERAGE INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS INCOME REIMBURSE- REIMBURSE-
(INCLUDES (LOSS) TO MENTS) TO MENTS) TO
DIVIDEND AVERAGE AVERAGE AVERAGE NET DIVIDEND PORTFOLIO
EXPENSE) NET ASSETS NET ASSETS (b) ASSETS (b) EXPENSE (c) TURNOVER (d)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006 (e) 2.30%(h) 0.32%(h) 2.85%(h) (0.23%)(h) 0.79%(h) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006 (e) 3.59%(h) (0.62%)(h) 4.62%(h) (1.65%)(h) 0.79%(h) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006 (e) 3.59%(h) (0.62%)(h) 4.69%(h) (1.72%)(h) 0.79%(h) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006 (e) 3.23%(h) (0.25%)(h) 4.01%(h) (1.03%)(h) 0.79%(h) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006 (e) 2.51%(h) 0.47%(h) 3.61%(h) (0.63%)(h) 0.79%(h) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2006 (e) 2.39%(h) 0.50%(h) 3.34%(h) (0.45%)(h) 0.79%(h) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Indicates the dividend expense charged for the period to average net assets.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(e) For the period from September 29, 2006 (commencement of operations) through October 31, 2006.
(f) Amount is less than $0.005.
(g) Not annualized.
(h) Annualized.
GARTMORE CONCEPT SERIES | 35
SECTION 6 GARTMORE MARKET NEUTRAL FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
------------------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED NET ASSETS
VALUE, INVESTMENT GAINS TOTAL FROM NET ASSET AT END OF
BEGINNING INCOME (LOSSES) ON INVESTMENT VALUE, END TOTAL PERIOD
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES OF PERIOD RETURN (a) (000S)
------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006 (e) $10.00 0.03 0.03 0.06 $ 10.06 0.60%(f) $ 1
------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006 (e) $10.00 0.02 0.03 0.05 $ 10.05 0.50%(f) $ 1
------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006 (e) $10.00 0.02 0.03 0.05 $ 10.05 0.50%(f) $ 1
------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006 (e) $10.00 0.02 0.03 0.05 $ 10.05 0.50%(f) $ 1
------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006 (e) $10.00 0.03 0.03 0.06 $ 10.06 0.60%(f) $ 1
------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2006 (e) $10.00 0.03 0.03 0.06 $ 10.06 0.60%(f) $ 5,030
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF
EXPENSES RATIO OF NET
RATIO OF RATIO (PRIOR TO INVESTMENT
EXPENSES OF NET REIMBURSE- INCOME (LOSS)
TO AVERAGE INVESTMENT MENTS) TO (PRIOR TO
NET ASSETS INCOME AVERAGE NET REIMBURSE-
(INCLUDES (LOSS) TO ASSETS (INCLUDES MENTS) TO
DIVIDEND AVERAGE DIVIDEND AVERAGE NET DIVIDEND PORTFOLIO
EXPENSE) NET ASSETS EXPENSE) (b) ASSETS (b) EXPENSE (c) TURNOVER (d)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2006 (e) 2.23%(g) 3.56%(g) 2.82%(g) 2.97%(g) 0.64%(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2006 (e) 3.45%(g) 2.10%(g) 4.48%(g) 1.07%(g) 0.64%(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2006 (e) 3.45%(g) 2.10%(g) 4.53%(g) 1.02%(g) 0.64%(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2006 (e) 3.09%(g) 2.46%(g) 3.89%(g) 1.65%(g) 0.64%(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2006 (e) 2.36%(g) 3.19%(g) 3.45%(g) 2.10%(g) 0.64%(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2006 (e) 2.24%(g) 3.37%(g) 3.21%(g) 2.40%(g) 0.64%(g) 0.00%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Indicates the dividend expense charged for the period to average net assets.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(e) For the period from September 29, 2006 (commencement of operations) through October 31, 2006.
(f) Not annualized.
(g) Annualized.
36 | GARTMORE CONCEPT SERIES
SECTION 6 GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-----------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended June 30, 2002 (e) $11.14 6.65 (6.90) (0.25)
Year Ended June 30, 2003 (g) $10.89 (0.08) 0.14 0.06
Period Ended October 31, 2003 (f) $10.95 (0.07) 1.12 1.05
Year Ended October 31, 2004 $12.00 0.11 0.77 0.88
Year Ended October 31, 2005 $ 9.56 (0.02) 0.59 0.57
Year Ended October 31, 2006 $ 9.83 0.11 0.41 0.52
-----------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended June 30, 2002 (e) $11.14 (0.07) (0.17) (0.24)
Year Ended June 30, 2003 (g) $10.90 (0.23) 0.19 (0.04)
Period Ended October 31, 2003 (f) (g) $10.86 (0.10) 1.12 1.02
Year Ended October 31, 2004 $11.88 0.22 0.58 0.80
Year Ended October 31, 2005 $ 9.38 (0.09) 0.58 0.49
Year Ended October 31, 2006 $ 9.59 0.03 0.40 0.43
-----------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended June 30, 2002 $10.02 (0.66) (0.31) (0.97)
Year Ended June 30, 2003 $ 9.05 (0.19) 0.17 (0.02)
Period Ended October 31, 2003 (f) $ 9.03 (0.08) 0.93 0.85
Year Ended October 31, 2004 $ 9.88 0.64 (0.01) 0.63
Year Ended October 31, 2005 $ 7.21 (0.05) 0.42 0.37
Year Ended October 31, 2006 $ 7.29 0.03 0.30 0.33
-----------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (h) $ 9.21 (0.11) 0.31 0.20
Year Ended October 31, 2005 $ 9.41 (0.03) 0.59 0.56
Year Ended October 31, 2006 $ 9.68 0.08 0.40 0.48
-----------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (i) $ 9.28 (0.02) 0.31 0.29
Year Ended October 31, 2005 $ 9.57 (0.05) 0.63 0.58
Year Ended October 31, 2006 $ 9.85 0.11 0.44 0.55
-----------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
DISTRIBUTIONS
------------------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended June 30, 2002 (e) - - $10.89 (2.24%)(j)
Year Ended June 30, 2003 (g) - - $10.95 0.55%
Period Ended October 31, 2003 (f) - - $12.00 9.59%(j)
Year Ended October 31, 2004 (3.32) (3.32) $ 9.56 9.03%
Year Ended October 31, 2005 (0.30) (0.30) $ 9.83 6.09%
Year Ended October 31, 2006 (0.05) (0.05) $10.30 5.27%
------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended June 30, 2002 (e) - - $10.90 (2.15%)(j)
Year Ended June 30, 2003 (g) - - $10.86 (0.37%)
Period Ended October 31, 2003 (f) (g) - - $11.88 9.39%(j)
Year Ended October 31, 2004 (3.30) (3.30) $ 9.38 8.22%
Year Ended October 31, 2005 (0.28) (0.28) $ 9.59 5.33%
Year Ended October 31, 2006 (0.01) (0.01) $10.01 4.53%
------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended June 30, 2002 - - $ 9.05 (17.65%)
Year Ended June 30, 2003 - - $ 9.03 (0.22%)
Period Ended October 31, 2003 (f) - - $ 9.88 9.41%(j)
Year Ended October 31, 2004 (3.30) (3.30) $ 7.21 8.20%
Year Ended October 31, 2005 (0.29) (0.29) $ 7.29 5.35%
Year Ended October 31, 2006 (0.03) (0.03) $ 7.59 4.48%
------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (h) - - $ 9.41 2.17%(j)
Year Ended October 31, 2005 (0.29) (0.29) $ 9.68 6.16%
Year Ended October 31, 2006 (0.05) (0.05) $10.11 4.91%
------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (i) - - $ 9.57 3.12%(j)
Year Ended October 31, 2005 (0.30) (0.30) $ 9.85 6.27%
Year Ended October 31, 2006 (0.06) (0.06) $10.34 5.60%
------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------
RATIO OF
EXPENSES
(PRIOR TO
RATIO OF RATIO REIMBURSE-
EXPENSES OF NET MENTS) TO
TO AVERAGE INVESTMENT AVERAGE
NET ASSETS NET ASSETS INCOME NET ASSETS
AT END OF (INCLUDES (LOSS) TO (INCLUDES
PERIOD DIVIDEND AVERAGE DIVIDEND
(000S) EXPENSE) NET ASSETS EXPENSE) (b)
-----------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended June 30, 2002 (e) $ 144 1.95%(k) 122.95%(k) 2.26%(k)
Year Ended June 30, 2003 (g) $ 29,561 3.47% (2.04%) 3.66%
Period Ended October 31, 2003 (f) $ 29,468 3.23%(k) (1.77%)(k) (l)
Year Ended October 31, 2004 $ 24,411 3.27% (1.65%) 3.33%
Year Ended October 31, 2005 $ 33,828 2.81% (0.18%) 2.91%
Year Ended October 31, 2006 $ 48,717 2.59% 1.16% 2.61%
-----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended June 30, 2002 (e) $ 121 2.74%(k) (1.45%)(k) 2.86%(k)
Year Ended June 30, 2003 (g) $ 141 3.73% (2.31%) 4.54%
Period Ended October 31, 2003 (f) (g) $ 414 3.98%(k) (2.54%)(k) (l)
Year Ended October 31, 2004 $ 653 3.89% (2.30%) 3.96%
Year Ended October 31, 2005 $ 814 3.53% (0.90%) 3.62%
Year Ended October 31, 2006 $ 1,033 3.33% 0.42% 3.35%
-----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended June 30, 2002 $ 1,819 3.28% (5.41%) 3.71%
Year Ended June 30, 2003 $ 1,323 3.72% (2.31%) 4.54%
Period Ended October 31, 2003 (f) $ 1,487 3.98%(k) (2.52%)(k) (l)
Year Ended October 31, 2004 $ 2,641 3.90% (2.29%) 3.99%
Year Ended October 31, 2005 $ 19,372 3.55% (0.81%) 3.65%
Year Ended October 31, 2006 $ 36,586 3.33% 0.47% 3.35%
-----------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (h) $ 1 3.32%(k) (1.74%)(k) 3.36%(k)
Year Ended October 31, 2005 $ 1 2.82% (0.20%) 2.86%
Year Ended October 31, 2006 $ 1 2.96% 0.77% 2.99%
-----------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (i) $ 331 2.24%(k) (0.52%)(k) 2.43%(k)
Year Ended October 31, 2005 $ 3,877 2.56% 0.19% 2.67%
Year Ended October 31, 2006 $ 11,538 2.33% 1.50% 2.35%
-----------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
RATIO
OF NET
INVESTMENT
INCOME
(LOSS)
(PRIOR TO
REIMBURSE-
MENTS) TO
AVERAGE NET DIVIDEND PORTFOLIO
ASSETS (b) EXPENSE (c) TURNOVER (d)
------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended June 30, 2002 (e) 122.64%(k) 0.03% 425%
Year Ended June 30, 2003 (g) (2.23%) 0.40% 424%
Period Ended October 31, 2003 (f) (l) 1.65% 126.69%
Year Ended October 31, 2004 (1.70%) 1.06% 577.36%
Year Ended October 31, 2005 (0.27%) 0.64% 827.26%
Year Ended October 31, 2006 1.14% 0.56% 739.31%
------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended June 30, 2002 (e) (1.57%)(k) 0.03% 425%
Year Ended June 30, 2003 (g) (3.12%) 0.40% 424%
Period Ended October 31, 2003 (f) (g) (l) 1.65% 126.69%
Year Ended October 31, 2004 (2.36%) 1.06% 577.36%
Year Ended October 31, 2005 (0.99%) 0.64% 827.26%
Year Ended October 31, 2006 0.40% 0.56% 739.31%
------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended June 30, 2002 (5.87%) 0.03% 425%
Year Ended June 30, 2003 (3.13%) 0.40% 424%
Period Ended October 31, 2003 (f) (l) 1.65% 126.69%
Year Ended October 31, 2004 (2.37%) 1.06% 577.36%
Year Ended October 31, 2005 (0.91%) 0.64% 827.26%
Year Ended October 31, 2006 0.44% 0.56% 739.31%
------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (h) (1.78%)(k) 1.06% 577.36%
Year Ended October 31, 2005 (0.25%) 0.64% 827.26%
Year Ended October 31, 2006 0.74% 0.56% 739.31%
------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (i) (0.72%)(k) 1.06% 577.36%
Year Ended October 31, 2005 0.08% 0.64% 827.26%
Year Ended October 31, 2006 1.48% 0.56% 739.31%
------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Indicates the dividend expense charged for the period to average net assets.
(d) Portfolio turnover is calculated on the basis of the Fund as whole without distinguishing among the classes of shares.
(e) For the period from October 31, 2001 (commencement of operations) through June 30, 2002.
(f) For the period from July 1, 2003 through October 31, 2003.
(g) Net investment income (loss) is based on average shares outstanding during the period.
(h) For the period from February 27, 2004 (commencement of operations) through October 31, 2004.
(i) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(j) Not annualized.
(k) Annualized.
(l) There were no fee reductions in this period.
GARTMORE CONCEPT SERIES | 37
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance during its last fiscal year)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. - 9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for closing share prices. Also, visit the Gartmore Funds' website at www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov;
o by electronic request to publicinfo@sec.gov;
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-CNCPT 2/07
CONCEPT Series
Gartmore Micro Cap Equity Fund
(CLOSED TO NEW INVESTORS)
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved the Fund's shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore Micro Cap Equity Fund Class A GMEAX -------------------------------------------------------------------------------- Gartmore Micro Cap Equity Fund Class B GMEBX -------------------------------------------------------------------------------- Gartmore Micro Cap Equity Fund Class C GMECX -------------------------------------------------------------------------------- Gartmore Micro Cap Equity Fund Class R GMERX -------------------------------------------------------------------------------- Gartmore Micro Cap Equity Fund Institutional Class GMEIX -------------------------------------------------------------------------------- Gartmore Micro Cap Equity Fund Institutional Service Class GMESX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARY AND PERFORMANCE
Gartmore Micro Cap Equity Fund
8 SECTION 2: FUND DETAILS
Additional Information about Investments, Investment Techniques and Risks
9 SECTION 3: FUND MANAGEMENT
Investment Adviser and Subadviser
Portfolio Management
Multi-Manager Structure
10 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
22 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other Tax-Deferred Accounts
Backup Withholding
24 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE CONCEPT SERIES | 1
CONCEPT Series
INTRODUCTION TO THE CONCEPT SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT ONE FUND (THE "FUND"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
Gartmore Micro Cap Equity Fund
The Fund's investment adviser has closed the Fund to new investors, and may do so to existing investors (excluding reinvestment of dividends and distributions) at some point in the future.
THE FUND IS PRIMARILY INTENDED:
o to offer a selected investment option using more aggressive equity approaches.
The Fund uses investment strategies that may involve substantially higher risks and greater volatility than most mutual funds and are not appropriate for all investors. To decide if this Fund is appropriate for your investment program, you should consider your personal investment objectives and financial circumstances, the length of time until you need your money and the amount of risk you are comfortable taking.
The following section summarizes key information about the Fund, including information regarding its investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT THE FUND WILL MEET ITS OBJECTIVE OR THAT ITS PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
The Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
The Fund offers six different share classes--Class A, Class B, Class C, Class R, Institutional Service Class and Institutional Class. An investment in any share class of the Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for the Fund are set forth in the Fund Summary.
The Fund may employ a "multi-manager" structure, which means that Gartmore Mutual Fund Capital Trust (the "Adviser"), as the Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for the Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Fund in your best interest and to operate the Fund more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE CONCEPT SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMON STOCK - securities representing shares of ownership of a corporation.
EQUITY SECURITIES - securities, including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts, that represent an ownership interest in the issuer.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
MICRO-CAP COMPANIES - small companies whose market capitalization is similar to those of companies included in the Russell Microcap Growth(TM) Index, ranging from $8 million to $2.28 billion as of January 31, 2007. Micro-cap companies are substantially smaller than companies included in the Standard & Poor's 500 Index.
GARTMORE CONCEPT SERIES | 3
SECTION 1 GARTMORE MICRO CAP EQUITY FUND SUMMARY AND PERFORMANCE
THE FUND'S INVESTMENT ADVISER HAS CLOSED THE FUND TO NEW INVESTORS, AND MAY DO
SO TO EXISTING INVESTORS (EXCLUDING REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS) AT SOME POINT IN THE FUTURE. IF THIS OCCURS, EXISTING SHAREHOLDERS WILL RECEIVE
ADVANCE NOTICE. THE FUND'S INVESTMENT ADVISER MAY REOPEN THE FUND TO NEW INVESTORS AT ANY TIME.
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net asset in EQUITY SECURITIES issued by very small companies considered to be MICRO-CAP COMPANIES as of the time of investment. The Fund generally holds between 50 and 100 securities.
The Fund focuses on small, undiscovered, emerging growth companies, seeking to provide investors with potentially higher returns than would be achieved by investing primarily in larger, more established companies. Since micro-cap companies are generally not as well known and have less of an institutional following than larger companies, they may provide opportunities for higher returns due to inefficiencies in the marketplace.
In analyzing specific companies for possible investment, the Fund's portfolio manager ordinarily looks for several of the following characteristics:
o above average earnings growth;
o attractive valuation;
o development of new products, technologies or markets;
o high quality balance sheet and
o strong management team.
Although the portfolio manager looks for companies with the potential for strong earnings growth rates, some of the Fund's investments may be in companies that are experiencing losses.
The Fund's portfolio manager may sell a particular security based on the following criteria:
o changes in company fundamentals;
o weak company management;
o opportunity to purchase other, more attractively priced stocks;
o MARKET CAPITALIZATION of twice the portfolio's buying range or
o weakening financial stability.
The Fund is not required to sell a security that has appreciated beyond the micro-cap range, but it typically will do so.
The Fund may invest without limit in initial public offerings ("IPOs"), although it is uncertain whether such IPOs will be available for investment by the Fund and what impact, if any, they will have on the Fund's performance.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
MICRO-CAP RISK - in general, stocks of smaller companies trade in lower volumes and are subject to greater or more unpredictable price changes than larger company securities or the market overall. These risks may be more significant for investments in small companies that would be considered to be micro-cap companies. Micro-cap companies may have limited product lines or markets, be less financially secure than larger companies or depend on a small number of key personnel. If adverse developments occur, such as due to management changes or product failure, the Fund's investment in a micro-cap company may lose substantial value. INVESTING IN MICRO-CAP COMPANIES REQUIRES A LONGER TERM INVESTMENT VIEW AND MAY NOT BE APPROPRIATE FOR ALL INVESTORS.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Russell Microcap(TM) Growth Index or other funds with similar investment objectives and strategies.
INITIAL PUBLIC OFFERING RISK - availability of IPOs may be limited and the Fund may not be able to buy any shares at the offering price or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE MICRO CAP EQUITY FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. The performance of micro-cap stocks may be volatile; therefore, the Fund's annual total returns may vary considerably from one period to the next. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2003 2004 2005 2006 --------------------------------- 93.06% 31.72% -0.14% 13.91% |
BEST QUARTER: 32.64% - 2ND QTR OF 2003
WORST QUARTER: -9.56% - 1ST QTR OF 2005
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
--------------------------------------------------------------------------------
SINCE INCEPTION
1 YEAR (JUNE 27, 2002)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 7.34% 22.25%
--------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 1.05% 20.25%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares 7.77% 19.01%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 8.88% 22.73%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2) 12.30% 22.98%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 13.39% 23.30%
--------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 14.24% 24.17%
--------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 14.24% 24.17%
--------------------------------------------------------------------------------
Russell Microcap Growth Index(4) 11.39% 14.09%
--------------------------------------------------------------------------------
Russell Microcap Index(4) 16.54% 16.14%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class R shares (12/30/03) are based on the previous performance of Class B shares. This performance is substantially similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. Returns for Class R shares have been adjusted to eliminate sales charges that do not apply to Class R shares, but have not been adjusted to reflect its lower expenses.
4 Effective February 28, 2007, the Fund changed its benchmark from the Russell Microcap Index to the Russell Microcap Growth Index. The Russell Microcap Index is an unmanaged index that measures the performance of the microcap segment, which represents less than 3% of the U.S. equity market; includes the smallest 1,000 securities in the small-cap Russell 2000(R) Index plus the next 1,000 companies below the Russell 2000 Index, based on a ranking of all U.S. equities by market capitalization. The Russell Microcap Growth Index is an unmanaged index that provides a measurement of the performance of the micro-cap growth segment of the U.S. equity market, such as micro-cap companies with higher price-to-book ratios and higher forecasted growth values. The Fund changed its benchmark in order to conform more appropriately to the Fund's objective and strategies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE CONCEPT SERIES | 5
SECTION 1 GARTMORE MICRO CAP EQUITY FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES INSTITUTIONAL (PAID DIRECTLY CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL FROM YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% ------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------- Other Expenses(7) 0.35% 0.27% 0.27% 0.47% 0.27% 0.27% ------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES(8) 1.85% 2.52% 2.52% 2.22% 1.52% 1.52% ------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.08%, 0.20% and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.65% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses" could increase to 2.15% for Class A shares, 2.40% for Class R shares and 1.90% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limitation.
6 | GARTMORE CONCEPT SERIES
SECTION 1 GARTMORE MICRO CAP EQUITY FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 752 $ 1,123 $ 1,518 $ 2,619
--------------------------------------------------------------------------------
Class B shares 755 1,085 $ 1,540 $ 2,615
--------------------------------------------------------------------------------
Class C shares 355 785 1,340 2,856
--------------------------------------------------------------------------------
Class R shares 225 694 1,190 2,554
--------------------------------------------------------------------------------
Institutional Service Class shares 155 480 829 1,813
--------------------------------------------------------------------------------
Institutional Class shares 155 480 829 1,813
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 255 $ 785 $ 1,340 $ 2,615
--------------------------------------------------------------------------------
Class C shares 255 785 1,340 2,856
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE CONCEPT SERIES | 7
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - The Fund could lose value if the individual stocks in which it has invested (or, convertible securities linked to such stocks) and/or the overall stock markets on which the stocks trade decline in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small- or large-cap stocks or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events and the fluctuation of other stock markets around the world.
FLOATING-RATE AND VARIABLE-RATE SECURITIES RISK - The Fund's investment in floating-rate or variable-rate securities is subject to interest rate risk like other debt securities. Because they may be callable, these bonds are also subject to the risk that the Fund will be repaid prior to the stated maturity and that the repaid principal will be reinvested at a lower interest rate, reducing the Fund's income. Floating- and variable-rate securities have interest rates that change periodically.
REIT RISK - the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
WHEN-ISSUED SECURITIES RISK - the risk of the value of a security falling between the time the Fund commits to buy it and the payment date. If this occurs, the Fund may sustain a loss. In addition, when the Fund buys a security on a when-issued basis, it is subject to the risk that market interest rates will increase before the time the security is delivered, so that the yield on the security may be lower than the yield available on other, comparable securities at the time of delivery.
PORTFOLIO TURNOVER - The Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
TEMPORARY INVESTMENTS - The Fund generally will be invested fully in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, the Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances and interest-bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents the Fund from fully pursuing its investment objective and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Fund's principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
The Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Fund's policies and procedures regarding the release of portfolio holdings information is available in the Fund's SAI.
8 | GARTMORE CONCEPT SERIES
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER AND SUBADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Fund's investment adviser. The Adviser manages the investment of the Fund's assets and supervises the daily business affairs of the Fund. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved a new investment advisory agreement with the Adviser with respect to the Fund, which is identical to the existing investment advisory agreement in all material respects. The new investment advisory agreement with the Adviser is subject to the approval of the Fund's shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
In connection with the transactions proposed pursuant to the Purchase Agreement, the Board of Trustees of the Trust has approved the appointment of NorthPointe Capital LLC ("NorthPointe") as the subadviser to the Gartmore Micro Cap Equity Fund. The portfolio management team that manages the Gartmore Micro Cap Equity Fund currently on behalf of the Adviser is also employed by NorthPointe. The appointment of NorthPointe as subadviser to the Gartmore Micro Cap Equity Fund is subject to the approval of the Fund's shareholders.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Fund's advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
The Fund pays the Adviser a management fee based on its average daily net assets. The total aggregate management fee paid by the Fund for the fiscal year ended October 31, 2006, expressed as a percentage of average daily net assets and taking into account any applicable waivers, was 1.25%.
The total annual advisory fees that can be paid to the Fund's Adviser (as a percentage of average daily net assets) is 1.25%.
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreement for the Fund will be available in the Fund's semiannual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
PORTFOLIO MANAGEMENT
GARTMORE MICRO CAP EQUITY FUND
Carl P. Wilk, CFP, is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. He currently also manages or co-manages the Gartmore Small Cap Leaders Fund and the NorthPointe Small Cap Growth Fund.
Mr. Wilk joined the Adviser in April 2002. Prior to April 2002, he was senior portfolio manager and partner of Munder Capital Management, portfolio manager of the Munder MicroCap Equity Fund and co-manager of the Munder Small Company Growth Fund. He also managed Munder's Small Company Focus style for institutional and wrap accounts.
The SAI provides additional information about the portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. If a new non-affiliated subadviser is hired for the Fund, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows the Fund greater flexibility and enables it to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
GARTMORE CONCEPT SERIES | 9
SECTION 4 INVESTING WITH GARTMORE FUNDS
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser for the Fund, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or the Fund will obtain favorable results at any given time.
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. THE FUND IS CURRENTLY CLOSED TO NEW INVESTORS. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES
Front-end sales charge A front-end sales charge means that a portion of
up to 5.75% your initial investment goes toward the sales
charge and is not invested.
Contingent deferred
sales charge (CDSC)(1) Reduction and waivers of sales charges may be
available.
Annual service and/or
12b-1 fee of 0.25%
Administrative services Total annual operating expenses are lower than Class
fee up to 0.25% B and Class C expenses, which means higher
dividends and/or net asset value ("NAV") per
share.
No conversion feature.
No maximum investment amount.
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CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines 1% in most years to zero after six
years.
Annual service and/or Total annual operating expenses are higher than
12b-1 fee of 1.00% Class A expenses, which means lower dividends
No administrative and/or NAV per share.
services fee
Automatic conversion to Class A shares after seven
years, which means lower annual expenses in the
future.
Maximum investment amount of $100,000. Larger
investments may be rejected.
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CLASS C SHARES No front-end sales charge means your full investment
immediately goes toward buying shares.
CDSC of 1.00% No reduction of CDSC, but waivers may be available.
The CDSC declines to zero after one year.
Total annual operating expenses are higher than
Class A expenses, which means lower dividends
and/or NAV per share.
Annual service and/or
12b-1 fee of 1.00% No conversion feature.
No administrative Maximum investment amount of $1,000,000(2). Larger
services fee investments may be rejected.
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1 Unless you are eligible to purchase Class A shares without a sales charge, a CDSC of up to 1.00% may be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
10 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
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SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
--------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
--------------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
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$100,000 to $249,999 3.50 3.63 3.00
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$250,000 to $499,999 2.50 2.56 2.00
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$500,000 to $999,999 2.00 2.04 1.75
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$1 million or more None None None*
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|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
GARTMORE CONCEPT SERIES | 11
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Fund in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 1.00% applies if a "finder's fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finder's fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason;
o no finder's fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN
REDEMPTIONS OF CLASS A SHARES
-------------------------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If redeemed within 18 months 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% -------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70 1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
12 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
--------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
--------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
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CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1%.
SHARE CLASSES AVAILABLE ONLY TO INSTITUTIONAL ACCOUNTS
The Fund offers Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial services firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Fund for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Fund for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
GARTMORE CONCEPT SERIES | 13
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Fund;
o retirement plans for which no third-party administrator receives compensation from the Fund(s);
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
The Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Fund to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Institutional Class and Institutional Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Fund's assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
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CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
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Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
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ADMINISTRATIVE SERVICES FEES
Class A, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by the Fund to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Fund. Under the Administrative Services Plan, the Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of the Fund's Class A, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of the Fund on a recommended or preferred list and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Fund will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Fund to the Adviser to ensure that the levels of such advisory fees do not involve the indirect use of the Fund's assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments and not from the Fund's assets, the amount of any revenue sharing payments is determined by NWD Investments.
14 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Fund in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of the Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of the Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
GARTMORE CONCEPT SERIES | 15
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Fund's transfer agent in Columbus, Ohio or an authorized intermediary prior to the calculation of the Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED
PURCHASE. EACH FUND MAY REJECT ANY ORDER TO BUY UPON 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS.
SHARES AND MAY SUSPEND THE SALE OF SHARES AT ANY
TIME. ** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED.
SEE "MEDALLION SIGNATURE GUARANTEE" BELOW.
-----------------------------------------------------------------------------------------------------------------
THROUGH AN AUTHORIZED INTERMEDIARY. The THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
Distributor has relationships with certain brokers relationships with certain brokers and other financial
and other financial intermediaries who are intermediaries who are authorized to accept purchase,
authorized to accept purchase, exchange and exchange and redemption orders for the Funds. Your
redemption orders for the Funds. Your transaction transaction is processed at the NAV next calculated
is processed at the NAV next calculated after the after the Funds' agent or an authorized intermediary
Funds' agent or an authorized intermediary receives your order in proper form.
receives your order in proper form.
-----------------------------------------------------------------------------------------------------------------
BY MAIL. Complete an application and send with a BY MAIL OR FAX. You may request an exchange or
check made payable to: Gartmore Funds. Payment redemption by mailing or faxing a letter to Gartmore
must be made in U.S. dollars and drawn on a U.S. Funds. The letter must include your account number(s)
bank. THE FUNDS DO NOT ACCEPT CASH, STARTER and the name(s) of the Fund(s) you wish to exchange from
CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, and to. The letter must be signed by all account owners.
CREDIT CARD CHECKS OR MONEY ORDERS. We reserve the right to request original documents for
any faxed requests.
-----------------------------------------------------------------------------------------------------------------
BY TELEPHONE. You will have automatic telephone BY TELEPHONE. You will have automatic telephone
privileges unless you decline this option on your privileges unless you decline this option on your
application. The Funds follow procedures to application. The Funds follow procedures to confirm that
confirm that telephone instructions are genuine telephone instructions are genuine and will not be
and will not be liable for any loss, injury, liable for any loss, injury, damage or expense that
damage or expense that results from executing such results from executing such instructions. The Funds may
instructions. The Funds may revoke telephone revoke telephone privileges at any time, without notice
privileges at any time, without notice to to shareholders. For redemptions, shareholders who own
shareholders. shares in an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed
to the address of record.
The Funds may record telephone instructions to redeem
shares and may request redemption instructions in
writing, signed by all shareholders on the account.
-----------------------------------------------------------------------------------------------------------------
ON-LINE. Transactions may be made through the ON-LINE. Transactions may be made through the Gartmore
Gartmore Funds' website. However, the Funds may Funds' website. However, the Funds may discontinue
discontinue on-line transactions of Fund shares at on-line transactions of Fund shares at any time.
any time.
-----------------------------------------------------------------------------------------------------------------
BY BANK WIRE. You may have your bank transmit BY BANK WIRE. The Funds can wire the proceeds of your
funds by federal funds wire to the Funds' redemption directly to your account at a commercial
custodian bank. (The authorization will be in bank. A voided check must be attached to your
effect unless you give the Funds written notice of application. (The authorization will be in effect unless
its termination.) you give the Funds written notice of its termination.)
o if you choose this method to open a new
account, you must call our toll-free number o your proceeds typically will be wired to your bank
before you wire your investment and arrange to on the next business day after your order has been
fax your completed application. processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the
redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in order
to receive the current day's NAV. o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher
fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund BY AUTOMATED CLEARING HOUSE (ACH). Your redemption
your Gartmore Funds' account with proceeds from proceeds can be sent to your bank via ACH on the second
your bank via ACH on the second business day after business day after your order has been processed. A
your purchase order has been processed. A voided voided check must be attached to your application. Money
check must be attached to your application. Money sent through ACH should reach your bank in two business
sent through ACH typically reaches Gartmore Funds days. There is no fee for this service. (The
from your bank in two business days. There is no authorization will be in effect unless you give the
fee for this service. (The authorization will be Funds written notice of its termination.)
in effect unless you give the Funds written notice
of its termination.) ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their RETIREMENT PLAN PARTICIPANTS should contact their
retirement plan administrator regarding retirement plan administrator regarding transactions.
transactions. Retirement plans or their Retirement plans or their administrators wishing to
administrators wishing to conduct transactions conduct transactions should call our toll-free number.
should call our toll-free number. Eligible Eligible entities or individuals wishing to conduct
entities or individuals wishing to conduct transactions in Institutional Service Class or
transactions in Institutional Service Class or Institutional Class shares should call our toll-free
Institutional Class shares should call our number.
toll-free number.
|
16 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of the Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by the Fund allocated to a particular class, less the liabilities allocated to that class, by the total number outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by the Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Fund are valued in order to determine the Fund's NAV. The Valuation Procedures provide that the Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of the Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that the Fund's NAV is calculated, the Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on the Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to the Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, the Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which the Fund's shares are purchased and redeemed are fair and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
The Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
GARTMORE CONCEPT SERIES | 17
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS B AND CLASS C SHARES To open an account $2,000 (per Fund) To open an IRA account $1,000 (per Fund) Additional investments $ 100 (per Fund) To start an Automatic Asset Accumulation Plan $1,000 Additional Investments (Automatic Asset Accumulation Plan) $ 50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or other financial intermediary pursuant to an agreement, the Fund must obtain the following information for each person that opens a new account:
o Name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities.
Federal law prohibits the Fund and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Fund may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Fund and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above the Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, the Fund may waive the quarterly fee.
o The Fund reserves the right to sell your remaining shares and close your account if a sale of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Funds, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of the Fund with a lower sales charge to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original fund is charged.
18 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund.)
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C Shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a minimum amount of $50 or more. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Transfer Agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell, or in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or Gartmore Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
Under extraordinary circumstances, the Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of the Fund. Affiliated persons of the Fund include shareholders who are affiliates of the Fund's investment adviser and shareholders of the Fund owning 5% or more of the outstanding shares of the Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
MEDALLION SIGNATURE GUARANTEE
A medallion signature guarantee is required for redemptions of shares of the Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
GARTMORE CONCEPT SERIES | 19
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or redemptions and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
The Fund may be more or less affected by short-term trading in Fund shares,
depending on various factors such as the size of the Fund, the amount of assets
the Fund typically maintains in cash or cash equivalents, the dollar amount,
number and frequency of trades in Fund shares and other factors. A Fund that
invests in foreign securities may be at greater risk for excessive trading.
Investors may attempt to take advantage of anticipated price movements in
securities held by the Fund based on events occurring after the close of a
foreign market that may not be reflected in the Fund's NAV (referred to as
"arbitrage market timing"). Arbitrage market timing may also be attempted in
funds that hold significant investments in small-cap securities, high-yield
(junk) bonds and other types of investments that may not be frequently traded.
There is the possibility that arbitrage market timing, under certain
circumstances, may dilute the value of Fund shares if redeeming shareholders
receive proceeds (and buying shareholders receive shares) based on NAVs that do
not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Fund:
MONITORING OF TRADING ACTIVITY
The Fund, through the Adviser and its agents, monitors selected trades and flows of money in and out of the Fund in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Fund may, in its discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever the Fund is able to identify short-term trades and/or traders, the Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate a Fund's excessive trading policies or its exchange limits.
The Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of the Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Fund has fair value pricing procedures in place, as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
Despite its best efforts, the Fund may be unable to identify or deter excessive trades conducted through certain intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, the Fund may not be able to prevent all market timing and its potential negative impact.
20 | GARTMORE CONCEPT SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. This exchange/redemption fee is in addition to any CDSC that may be applicable at the time of redemption. If you exchange assets into a Fund with a exchange/redemption fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70 1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose an exchange fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose an exchange fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these Funds into another Gartmore Fund if you have held the shares of the Fund with the exchange for less than the minimum holding period listed below:
--------------------------------------------------------------------------------
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
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Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
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Gartmore Global Financial Services Fund 2.00% 90
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Gartmore Global Health Sciences Fund 2.00% 90
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Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and Communications
Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
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Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
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|
GARTMORE CONCEPT SERIES | 21
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. The Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, the Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
The Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gain distributions you receive from the Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Fund, from ascertaining with certainty, until after the calendar year end, and in some cases the Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, the Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Fund (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in the Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
22 | GARTMORE CONCEPT SERIES
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in the Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gain distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUND.
GARTMORE CONCEPT SERIES | 23
SECTION 6 GARTMORE MICRO CAP EQUITY FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Fund's financial performance for the five years or periods ended October 31. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) (e) $ 10.00 (0.04) (1.32) (1.36)
Year Ended October 31, 2003 $ 8.64 (0.02) 7.29 7.27
Year Ended October 31, 2004 $ 15.91 (0.18) 3.81 3.63
Year Ended October 31, 2005 $ 19.56 (0.34) 2.63 2.29
Year Ended October 31, 2006 $ 21.47 (0.27) 4.22 3.95
------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.06) (1.33) (1.39)
Year Ended October 31, 2003 $ 8.61 (0.06) 7.19 7.13
Year Ended October 31, 2004 $ 15.74 (0.26) 3.72 3.46
Year Ended October 31, 2005 $ 19.22 (0.46) 2.55 2.09
Year Ended October 31, 2006 $ 20.93 (0.43) 4.12 3.69
------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.06) (1.33) (1.39)
Year Ended October 31, 2003 $ 8.61 (0.05) 7.20 7.15
Year Ended October 31, 2004 $ 15.76 (0.24) 3.70 3.46
Year Ended October 31, 2005 $ 19.24 (0.47) 2.56 2.09
Year Ended October 31, 2006 $ 20.95 (0.41) 4.10 3.69
------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (f) $ 17.38 (0.27) 2.14 1.87
Year Ended October 31, 2005 $ 19.27 (0.29) 2.53 2.24
Year Ended October 31, 2006 $ 21.13 (0.32) 4.13 3.81
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
------------------------------------------------------------------------------------------------------------------
NET ASSET
NET REALIZED TOTAL REDEMPTION VALUE, END TOTAL
GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) (e) - - - $ 8.64 (13.60%)(g)
Year Ended October 31, 2003 - - - $ 15.91 84.14%
Year Ended October 31, 2004 -(i) -(i) 0.02 $ 19.56 22.96%
Year Ended October 31, 2005 (0.40) (0.40) 0.02 $ 21.47 11.69%
Year Ended October 31, 2006 (1.41) (1.41) - $ 24.01 19.19%
------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) - - - $ 8.61 (13.90%)(g)
Year Ended October 31, 2003 - - - $ 15.74 82.81%
Year Ended October 31, 2004 -(i) -(i) 0.02 $ 19.22 22.13%
Year Ended October 31, 2005 (0.40) (0.40) 0.02 $ 20.93 10.84%
Year Ended October 31, 2006 (1.41) (1.41) - $ 23.21 18.41%
------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) - - - $ 8.61 (13.90%)(g)
Year Ended October 31, 2003 - - - $ 15.76 83.04%
Year Ended October 31, 2004 -(i) -(i) 0.02 $ 19.24 22.10%
Year Ended October 31, 2005 (0.40) (0.40) 0.02 $ 20.95 10.83%
Year Ended October 31, 2006 (1.41) (1.41) - $ 23.23 18.39%
------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (f) -(i) -(i) 0.02 $ 19.27 10.89%(g)
Year Ended October 31, 2005 (0.40) (0.40) 0.02 $ 21.13 11.61%
Year Ended October 31, 2006 (1.41) (1.41) - $ 23.53 18.87%
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) (e) $ 310 1.80%(h) (1.32%)(h) 8.73%(h) (8.25%)(h) 56.08%
Year Ended October 31, 2003 $ 17,023 1.82% (1.32%) 2.26% (1.76%) 104.50%
Year Ended October 31, 2004 $ 74,983 1.81% (1.35%) 1.82% (1.37%) 107.36%
Year Ended October 31, 2005 $ 68,375 1.86% (1.31%) 1.87% (1.32%) 108.54%
Year Ended October 31, 2006 $ 57,257 1.85% (1.00%) 1.88% (1.03%) 95.53%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 43 2.55%(h) (2.04%)(h) 8.46%(h) (7.95%)(h) 56.08%
Year Ended October 31, 2003 $ 1,611 2.54% (2.08%) 2.99% (2.52%) 104.50%
Year Ended October 31, 2004 $ 6,403 2.55% (2.11%) 2.57% (2.13%) 107.36%
Year Ended October 31, 2005 $ 7,647 2.61% (2.04%) 2.62% (2.06%) 108.54%
Year Ended October 31, 2006 $ 7,117 2.52% (1.68%) 2.56% (1.71%) 95.53%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 43 2.55%(h) (2.04%)(h) 8.46%(h) (7.95%)(h) 56.08%
Year Ended October 31, 2003 $ 5,609 2.54% (2.04%) 2.90% (2.40%) 104.50%
Year Ended October 31, 2004 $ 30,377 2.55% (2.11%) 2.57% (2.13%) 107.36%
Year Ended October 31, 2005 $ 37,980 2.61% (2.05%) 2.62% (2.06%) 108.54%
Year Ended October 31, 2006 $ 36,076 2.52% (1.68%) 2.56% (1.71%) 95.53%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (f) $ 1 2.17%(h) (1.78%)(h) 2.17%(h) (1.78%)(h) 107.36%
Year Ended October 31, 2005 $ 1 1.94% (1.39%) 1.94% (1.39%) 108.54%
Year Ended October 31, 2006 $ 1 2.01% (1.23%) 2.05% (1.26%) 95.53%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from June 27, 2002 (commencement of operations) through October 31, 2002.
(e) Net investment income (loss) is based on average shares outstanding during the period.
(f) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(g) Not annualized.
(h) Annualized.
(i) Amount is less than $0.005.
24 | GARTMORE CONCEPT SERIES
SECTION 6 GARTMORE MICRO CAP EQUITY FUND FINANCIAL HIGHLIGHTS (CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.03) (1.33) (1.36)
Year Ended October 31, 2003 $ 8.64 (0.13) 7.45 7.32
Year Ended October 31, 2004 $ 15.96 (0.28) 3.97 3.69
Year Ended October 31, 2005 $ 19.67 (0.19) 2.54 2.35
Year Ended October 31, 2006 $ 21.64 (0.15) 4.21 4.06
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.03) (1.33) (1.36)
Year Ended October 31, 2003 $ 8.64 (0.13) 7.45 7.32
Year Ended October 31, 2004 $ 15.96 (0.16) 3.85 3.69
Year Ended October 31, 2005 $ 19.67 (0.22) 2.58 2.36
Year Ended October 31, 2006 $ 21.65 (0.13) 4.18 4.05
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------------
NET ASSET
NET REALIZED TOTAL REDEMPTION VALUE, END TOTAL
GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) - - - $ 8.64 (13.60%)(g)
Year Ended October 31, 2003 - - - $ 15.96 84.72%
Year Ended October 31, 2004 -(i) -(i) 0.02 $ 19.67 23.26%
Year Ended October 31, 2005 (0.40) (0.40) 0.02 $ 21.64 11.93%
Year Ended October 31, 2006 (1.41) (1.41) - $ 24.29 19.62%
---------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (d) - - - $ 8.64 (13.60%)(g)
Year Ended October 31, 2003 - - - $ 15.96 84.72%
Year Ended October 31, 2004 -(i) -(i) 0.02 $ 19.67 23.26%
Year Ended October 31, 2005 (0.40) (0.40) 0.02 $ 21.65 11.98%
Year Ended October 31, 2006 (1.41) (1.41) - $ 24.29 19.56%
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 43 1.55%(h) (1.04%)(h) 7.45%(h) (6.94%)(h) 56.08%
Year Ended October 31, 2003 $ 80 1.55% (1.15%) 2.40% (2.00%) 104.50%
Year Ended October 31, 2004 $ 51 1.51% (1.10%) 1.52% (1.11%) 107.36%
Year Ended October 31, 2005 $ 225 1.62% (1.05%) 1.64% (1.07%) 108.54%
Year Ended October 31, 2006 $ 320 1.52% (0.68%) 1.55% (0.72%) 95.53%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2002 (d) $ 1,556 1.55%(h) (1.04%)(h) 7.46%(h) (6.95%)(h) 56.08%
Year Ended October 31, 2003 $ 2,873 1.55% (1.15%) 2.40% (2.00%) 104.50%
Year Ended October 31, 2004 $ 3,493 1.52% (1.14%) 1.54% (1.15%) 107.36%
Year Ended October 31, 2005 $ 8,113 1.63% (1.05%) 1.65% (1.07%) 108.54%
Year Ended October 31, 2006 $ 15,451 1.51% (0.69%) 1.55% (0.72%) 95.53%
---------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from June 27, 2002 (commencement of operations) through October 31, 2002.
(e) Net investment income (loss) is based on average shares outstanding during the period.
(f) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(g) Not annualized.
(h) Annualized.
(i) Amount is less than $0.005.
GARTMORE CONCEPT SERIES | 25
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Fund:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m.
- 9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for
closing share prices. Also, visit the Gartmore Funds' website at
www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov,
o by electronic request to publicinfo@sec.gov.
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-MCE 2/07
LEADERSHIP Series
Gartmore Mid Cap Growth Leaders Fund
Gartmore Nationwide Leaders Fund
Gartmore Small Cap Leaders Fund
Gartmore U.S. Growth Leaders Fund
Gartmore Worldwide Leaders Fund
[LOGO] Gartmore Funds
Fund PROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
LEADERSHIP Series
These specialty Funds are concentrated stock portfolios focusing in major world markets and featuring the managers' BEST IDEAS.
FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Leaders Fund Class A NMGAX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Leaders Fund Class B NMGBX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Leaders Fund Class C GMGCX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Leaders Fund Class D NMCGX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Leaders Fund Class R GMGRX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Leaders Fund Institutional Class GMGIX -------------------------------------------------------------------------------- Gartmore Mid Cap Growth Leaders Fund Institutional Service Class n/a -------------------------------------------------------------------------------- Gartmore Nationwide Leaders Fund Class A GULAX -------------------------------------------------------------------------------- Gartmore Nationwide Leaders Fund Class B GULBX -------------------------------------------------------------------------------- Gartmore Nationwide Leaders Fund Class C GULCX -------------------------------------------------------------------------------- Gartmore Nationwide Leaders Fund Class R GNLRX -------------------------------------------------------------------------------- Gartmore Nationwide Leaders Fund Institutional Class GNLIX -------------------------------------------------------------------------------- Gartmore Nationwide Leaders Fund Institutional Service Class GULIX -------------------------------------------------------------------------------- Gartmore Small Cap Leaders Fund Class A GPLAX -------------------------------------------------------------------------------- Gartmore Small Cap Leaders Fund Class B GPLBX -------------------------------------------------------------------------------- Gartmore Small Cap Leaders Fund Class C GPLCX -------------------------------------------------------------------------------- Gartmore Small Cap Leaders Fund Class R GSLRX -------------------------------------------------------------------------------- Gartmore Small Cap Leaders Fund Institutional Class GPLIX -------------------------------------------------------------------------------- Gartmore Small Cap Leaders Fund Institutional Service Class GSLSX -------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Fund Class A GXXAX -------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Fund Class B GXXBX -------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Fund Class C GXXCX -------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Fund Class R GGLRX -------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Fund Institutional Class GGLIX -------------------------------------------------------------------------------- Gartmore U.S. Growth Leaders Fund Institutional Service Class GXXIX -------------------------------------------------------------------------------- Gartmore Worldwide Leaders Fund Class A GLLAX -------------------------------------------------------------------------------- Gartmore Worldwide Leaders Fund Class B GLLBX -------------------------------------------------------------------------------- Gartmore Worldwide Leaders Fund Class C GLLCX -------------------------------------------------------------------------------- Gartmore Worldwide Leaders Fund Class R GWLRX -------------------------------------------------------------------------------- Gartmore Worldwide Leaders Fund Institutional Class GWLIX -------------------------------------------------------------------------------- Gartmore Worldwide Leaders Fund Institutional Service Class GLLSX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND PERFORMANCE
Gartmore Mid Cap Growth Leaders Fund
Gartmore Nationwide Leaders Fund
Gartmore Small Cap Leaders Fund
Gartmore U.S. Growth Leaders Fund
Gartmore Worldwide Leaders Fund
25 SECTION 2: FUND DETAILS
Additional Information about Investments,
Investment Techniques and Risks
27 SECTION 3: FUND MANAGEMENT
Investment Adviser and Subadviser
Portfolio Management
Multi-Manager Structure
32 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
44 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and
Other Tax-Deferred Accounts
Backup Withholding
46 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE LEADERSHIP SERIES 1
LEADERSHIP Series
INTRODUCTION TO THE LEADERSHIP SERIES
This prospectus provides information about five funds (the "Funds"), the shares of which are offered by Gartmore Mutual Funds (the "Trust"):
Gartmore Mid Cap Growth Leaders Fund
Gartmore Nationwide Leaders Fund
Gartmore Small Cap Leaders Fund
Gartmore U.S. Growth Leaders Fund
Gartmore Worldwide Leaders Fund
These Funds are primarily intended:
o to help investors grow their capital through investments in leading U.S. or foreign companies.
Because these Funds invest in fewer individual securities than most mutual funds, they are subject to substantially higher risks and greater volatility than other mutual funds. These Funds may not be suitable for all investors. To decide if one or more of these Funds is appropriate for your investment program, you should consider your personal investment objectives and financial circumstances, the length of time until you need your money and the amount of risk you are comfortable taking.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
Each Fund offers six different share classes--Class A, Class B, Class C, Class R, Institutional Service Class and Institutional Class. Gartmore Mid Cap Growth Leaders Fund also offers Class D shares, but does not currently offer Institutional Service Class shares.
An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Although each Fund is currently managed by Gartmore Mutual Fund Capital Trust (the "Adviser"), each Fund may employ a "multi-manager" structure, which means that the Adviser, as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE LEADERSHIP SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMON STOCK - securities representing shares of ownership of a corporation.
CONVERTIBLE SECURITIES - debt securities or preferred stocks that may be converted into common stock. While a convertible security is a fixed-income security that typically pays interest or dividend income, its market value also tends to correspond to market changes in the value of the underlying common stock.
DERIVATIVE - a contract whose value is based on the performance of an underlying financial asset, index or economic measure.
EQUITY SECURITIES - securities including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts, that represent an ownership interest in the issuer.
GROWTH STYLE - a style of investing in equity securities of companies that the Fund's management believes have above-average rates of earnings growth and which therefore may experience above-average increases in stock price.
LARGE-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Standard & Poor's 500(R) Index, ranging from $1.4 billion to $446.9 billion as of December 31, 2006.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
MID-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell Midcap(R) Index, ranging from $1.19 billion to $20.34 billion as of January 31, 2007.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
TOTAL RETURN - investment return that reflects both capital appreciation or depreciation (increase or decrease in the market value of a security) and income (I.E., interest or dividends).
VALUE STYLE - a style of investing in equity securities that the Fund's management believes are undervalued, which means that their prices are less than Fund management believes they are worth, based on such factors as price-to-book ratio, price-to-earnings ratio and cash flow. Companies issuing such securities may be currently out of favor or experiencing poor operating conditions that Fund management believes to be temporary.
GARTMORE LEADERSHIP SERIES | 3
SECTION 1 GARTMORE MID CAP GROWTH LEADERS FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by MID-CAP COMPANIES that the Fund's management believes are, or have the potential to be, Mid Cap Growth Leaders. Fund management tries to choose such investments that will increase in value over the long term. Under normal circumstances, the Fund holds between 25 and 40 such securities.
The portfolio manager uses both a "top-down" and a "bottom-up" approach to select securities for the Fund. The "top-down" aspect of the approach considers such overall factors as the general health of the economy, interest rates, inflation, Federal Reserve policy and the vitality of particular industry sectors. This enables the portfolio manager to focus on the most attractive business sectors and to identify the most attractive prospective investments from the large universe of mid-cap stocks.
The portfolio manager then conducts a "bottom-up" analysis of potential investments, which means an in-depth evaluation of each particular company whose equity securities may be considered for inclusion in the Fund. The portfolio manager seeks individual companies with attractive earnings potential and sustainable growth characteristics that may not be fully recognized by the market. The portfolio manager evaluates each company's stock price over the course of 12 months, paying particular attention to minimum rates of capital appreciation, before a stock will be added to the Fund.
From time-to-time, the Fund may invest in companies experiencing "special situations", such as acquisitions, consolidations, mergers, reorganizations or other unusual developments, if the portfolio manager believes equity securities issued by those companies will increase in value.
The Fund's portfolio manager usually will sell a security if:
o the security hits an established price target;
o the circumstances of the company's industry sector appear to have changed;
o the company's fundamentals have weakened or
o more favorable opportunities have been identified.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Russell Midcap(R) Growth Index, or other funds with similar investment objectives and strategies.
MID-CAP RISK - in general, stocks of mid-cap companies may be more volatile and less liquid than larger company stocks.
SPECIAL SITUATION COMPANIES RISK - Special situation companies are companies that may be involved in acquisitions, consolidations, mergers, reorganizations, or other unusual developments that can affect a company's market value. If the anticipated benefits of the developments do not ultimately materialize, the value of a special situation company may decline.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
CONCENTRATION RISK - investing in a select group of securities could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of securities and industries.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE MID CAP GROWTH LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS D SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------ 20.70% 16.00% 10.10% 10.20% -39.70% -29.40% 36.40% 13.75% 15.47% 6.87% |
BEST QUARTER: 23.56% - 1ST QTR. OF 2000
WORST QUARTER: -36.86% - 1ST QTR. OF 2001
After-tax returns are shown in the table for Class D shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A Shares - Before Taxes(2) 0.45% 4.62% 2.42%
-------------------------------------------------------------------------------
Class B Shares - Before Taxes(2) 0.82% 4.84% 2.20%
-------------------------------------------------------------------------------
Class C Shares - Before Taxes(2,3) 4.81% 5.16% 2.58%
-------------------------------------------------------------------------------
Class D Shares - Before Taxes 2.04% 5.24% 2.81%
-------------------------------------------------------------------------------
Class D Shares - After Taxes
on Distributions 2.04% 5.24% 1.74%
-------------------------------------------------------------------------------
Class D Shares - After Taxes on
Distributions and Sales of Shares 1.32% 4.51% 2.10%
-------------------------------------------------------------------------------
Class R Shares - Before Taxes(2) 6.19% 5.89% 3.13%
-------------------------------------------------------------------------------
Institutional Service Class Shares -
Before Taxes(2) 6.87% 6.20% 3.28%
-------------------------------------------------------------------------------
Institutional Class Shares -
Before Taxes(2) 6.87% 6.20% 3.28%
-------------------------------------------------------------------------------
Russell Midcap Growth(R) Index(4) 10.66% 8.22% 8.62%
-------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns through May 11, 1998 include the performance of the Fund's predecessor Fund. These returns were achieved prior to the creation of the Class A and Class B shares (May 11, 1998). Returns between May 11, 1998 and the first offering of Class C shares (March 1, 2001), Class R shares (December 30, 2003), Institutional Service Class shares (which have not yet commenced operations), and Institutional Class shares (September 28, 2004) are based on previous performance of Class D shares. Excluding the effect of certain fee waivers or reimbursements, the prior performance is similar to what these classes would have produced during those periods because all classes invest in the same portfolio of securities. Performance for these classes has been restated to reflect differences in sales charges, but not differing fees. If these fees were reflected, performance for Class C and Class R shares would have been lower.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 The Russell Midcap Growth(R) Index is an unmanaged index of mid- capitalization growth stocks of U.S. companies; measures the performance of the stocks of those Russell Midcap(R) Index companies with higher price-to-book ratios and higher forecasted growth values, and gives a broad look at how the stock prices of medium-sized U.S. companies have performed. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE LEADERSHIP SERIES | 5
SECTION 1 GARTMORE MID CAP GROWTH LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY CLASS A CLASS B CLASS C CLASS D CLASS R SERVICE INSTITUTIONAL
FROM YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
---------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None 4.50%(2) None None None
---------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None None
---------------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee
(as a percentage of amount
redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)
---------------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the
Fund's investments professionally
managed) 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% 0.80%
---------------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost of
sales, promotions and other distribution
activities, as well as certain shareholder
servicing costs) 0.25% 1.00% 1.00% None 0.50% None None
---------------------------------------------------------------------------------------------------------------------------------
Other Expenses(7) 0.47% 0.44% 0.44% 0.44% 0.64% 0.44% 0.44%
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.52% 2.24% 2.24% 1.24% 1.94% 1.24% 1.24%
---------------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/
Expense Reimbursement(8) 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04%
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES (AFTER
WAIVERS/REIMBURSEMENTS) 1.48% 2.20% 2.20% 1.20% 1.90% 1.20% 1.20%
---------------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A and Class D shares is reduced or
eliminated for purchases of $50,000 or more. For more information, see
Section 4, Investing with Gartmore Funds: Choosing a Share Class--
Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class D, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class D and Class R shares were 0.03%, 0.00% and 0.20%, respectively. Administrative services fees for Institutional Service Class shares are estimated to be 0.00% for the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.20% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.70% for Class A shares, 1.45% for Class D shares, 1.95% for Class R shares and 1.45% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
6 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE MID CAP GROWTH LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
This Example is intended to help you to 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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 717 $ 1,024 $ 1,353 $ 2,280
--------------------------------------------------------------------------------
Class B shares 723 996 1,396 2,305
--------------------------------------------------------------------------------
Class C shares 323 696 1,196 2,572
--------------------------------------------------------------------------------
Class D shares 567 822 1,097 1,879
--------------------------------------------------------------------------------
Class R shares 193 605 1,043 2,261
--------------------------------------------------------------------------------
Institutional Service Class shares 122 389 677 1,496
--------------------------------------------------------------------------------
Institutional Class shares 122 389 677 1,496
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 223 $ 696 $ 1,196 $ 2,305
--------------------------------------------------------------------------------
Class C shares 223 696 1,196 2,572
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class D, Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE LEADERSHIP SERIES | 7
SECTION 1 GARTMORE NATIONWIDE LEADERS FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks a high total return from a concentrated portfolio of U.S. securities.
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by U.S. Leaders, primarily in COMMON STOCKS and CONVERTIBLE SECURITIES. The portfolio manager seeks companies which generally meet one of the following characteristics:
o above-average revenue growth;
o above-average earnings growth;
o consistent earnings growth;
o attractive valuation.
The Fund is nondiversified, which means that it may invest a significant portion of the Fund's assets in the securities of a single or small number of companies. The Fund typically focuses its investments in a core group of 25 to 35 common stocks of LARGE-CAP and MID-CAP COMPANIES.
In seeking TOTAL RETURN, the portfolio manager seeks returns from both capital gains (i.e., an increase in the value of the stocks the Fund holds) as well as income generated by dividends paid by stock issuers. Over time, stock markets in general may produce proportionately higher capital gains relative to dividends, or vice versa, at different periods. While many of the stocks the Fund invests in pay dividends, the portfolio manager anticipates that capital gains may constitute a somewhat higher proportion of returns than dividends under current market conditions. However, stock markets could change, either suddenly or gradually, so that over time a higher proportion of the Fund's returns would be derived from dividends.
The Fund usually sells portfolio securities if:
o the outlook of a company's earnings growth becomes less attractive;
o more favorable opportunities are identified or
o a company's stock price has increased significantly.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Standard & Poor's 500(R) Index ("S&P 500 Index"), or other funds with similar investment objectives and strategies.
NONDIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
8 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE NATIONWIDE LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2002 2003 2004 2005 2006 ------------------------------------- -5.60% 24.60% 18.32% 9.81% 15.32% |
BEST QUARTER: 14.1% - 2ND QTR. OF 2003
WORST QUARTER: -16.3% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (DEC. 28, 2001)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 8.66% 10.71% 10.60%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions 5.58% 8.94% 8.84%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares 5.84% 8.34% 8.26%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 9.50% 10.94% 10.99%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2) 13.52% 11.21% 11.12%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 14.91% 11.56% 11.48%
--------------------------------------------------------------------------------
Institutional Service Class shares-
Before Taxes 15.52% 12.14% 12.05%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) 15.66% 12.22% 12.14%
--------------------------------------------------------------------------------
S&P 500 Index(5) 15.79% 6.19% 6.19%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class R shares (10/1/03) are based on the previous performance of Class B shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. Returns for Class R shares have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect its lower expenses.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Class have not been adjusted to reflect its lower expenses.
5 The S&P 500 Index is an unmanaged, market capitalization-weighted index of 500 widely held stocks of large-cap U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE LEADERSHIP SERIES | 9
SECTION 1 GARTMORE NATIONWIDE LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
-----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
-----------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed upon purchases
(as a percentage of offering price) 5.75%(2) None None None None None
-----------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) imposed upon
redemptions (as a percentage of offering or sale
price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
-----------------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee (as a percentage of amount
redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
-----------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
-----------------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed)(7) 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
-----------------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees (paid from
Fund assets to cover the cost of sales, promotions
and other distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
-----------------------------------------------------------------------------------------------------------------------------------
Other Expenses(8) 0.64% 0.60% 0.60% 0.80% 0.70% 0.60%
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.74% 2.45% 2.45% 2.15% 1.55% 1.45%
-----------------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense Reimbursement(9) 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER
WAIVERS/REIMBURSEMENTS) 1.49% 2.20% 2.20% 1.90% 1.30% 1.20%
-----------------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $ 50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 30 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base management fee depending on the assets in the Fund, and (2) upward or downward by up to 0.10% depending on the Fund's performance relative to its benchmark, the S&P 500 Index. Therefore, the management fee stated in the table above reflects, to the extent applicable, adjustments based on the Fund's assets and the Fund's performance relative to its benchmark as of October 31, 2006. Depending on the performance of the Fund, the management fee at the Fund's current asset level could range from 0.70% at its lowest to 0.90% at its highest. For more information, including a chart that shows the range of the minimum to maximum performance-based fees at all breakpoint levels, see Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.04%, 0.20%, and 0.10%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.20% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.70% for Class A shares, 1.95% for Class R shares and 1.45% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
10 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE NATIONWIDE LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 718 $ 1,069 $ 1,442 $ 2,498
--------------------------------------------------------------------------------
Class B shares 723 1,040 1,483 2,510
--------------------------------------------------------------------------------
Class C shares 323 740 1,283 2,767
--------------------------------------------------------------------------------
Class R shares 193 649 1,131 2,463
--------------------------------------------------------------------------------
Institutional Service Class shares 132 465 821 1,824
--------------------------------------------------------------------------------
Institutional Class shares 122 434 768 1,714
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 223 $ 740 $ 1,283 $ 2,510
--------------------------------------------------------------------------------
Class C shares 223 740 1,283 2,767
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $ 1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE LEADERSHIP SERIES | 11
SECTION 1 GARTMORE SMALL CAP LEADERS FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund typically invests at least 80% of the value of its net assets in EQUITY SECURITIES of issuers considered to be SMALL-CAP COMPANIES as of the time of investment and that are considered to be or to have the potential to be Small Cap Leaders.
The Fund is managed using a multi-team approach. One team employs a small-cap GROWTH STYLE while the other uses a small-cap VALUE STYLE. Each team typically manages approximately equal portions of the Fund's assets, although at times more of the Fund's assets may be allocated to either growth or value, depending on market conditions.
The Small Cap Growth Team invests in securities of undiscovered, emerging growth small-cap companies in an attempt to provide investors with potentially higher returns than funds that invest primarily in larger, more established companies. This team focuses on securities that exhibit some or all of the following characteristics:
o above-average earnings growth;
o attractive valuation;
o development of new products, technologies or markets;
o high-quality balance sheet and
o a strong management team.
The Small Cap Growth Team considers selling a particular security due to:
o any change in company fundamentals from the time of the original investment;
o the company's MARKET CAPITALIZATION reaching twice the Fund's buying range;
o deterioration of the stock's valuation such that other attractive stocks are available more cheaply;
o management's actions that are not in shareholders' best interests or
o weakening financial stability.
The Small Cap Value Team looks at factors such as earnings momentum and relative value, management action and price trends when selecting securities. This team focuses on securities that exhibit some or all of the following characteristics:
o attractive valuation and near-term strength of business (E.G., based on estimate revisions and earnings surprises);
o long-term growth prospects of the company and its industry;
o level of duress a company is experiencing;
o price-to-earnings ratio and price-to-free cash flow ratio that, in the team's opinion, reflect the best standards of value and
o quality of earnings.
The Small Cap Value Team considers selling a security when:
o a company's market capitalization exceeds the benchmark capitalization range;
o long-term growth prospects deteriorate;
o more compelling investment values are identified;
o near-term reported or pre-announced earnings are disappointing and recurring or
o the stock attains full valuation relative to stocks of similar companies or reaches the team's price target.
The Fund may invest without limit in initial public offerings ("IPOs") of small-cap companies, although such IPOs may not be available for investment by the Fund and the impact on performance of any such IPO would be uncertain.
12 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE SMALL CAP LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 2000(R) Index, or other funds with similar investment objectives and strategies.
SMALL CAP RISK - in general, stocks of small-cap companies trade in lower volumes and are subject to greater or more unpredictable price changes than securities of larger companies or the market overall. Small-cap companies may have limited product lines or markets, be less financially secure than larger companies, or depend on a small number of key personnel. If adverse developments occur, such as due to management changes or product failure, the Fund's investment in a small-cap company may lose substantial value. Investing in small-cap companies requires a longer term investment view and may not be appropriate for all investors.
GROWTH VERSUS VALUE STYLE RISK - over time growth and value investing styles may go in and out of favor (usually not at the same time) causing the Fund to sometimes underperform other equity funds that use different investing styles. There is a risk that the Fund's management may allocate a greater portion of the Fund's assets to growth when value is more in favor, or vice-versa.
INITIAL PUBLIC OFFERING RISK - IPOs may be limited and the Fund may not be able to buy any shares at the offering price, or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE LEADERSHIP SERIES | 13
SECTION 1 GARTMORE SMALL CAP LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2005 2006 -------------- 7.64% 28.13% |
BEST QUARTER: 20.15% - 1ST QTR. OF 2006
WORST QUARTER: -2.51% - 1ST QTR. OF 2005
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
Since Inception
1 Year (Dec. 29, 2004)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 20.79% 13.69%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions 17.63% 11.89%
--------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions
and Sales of Shares 13.83% 10.76%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 22.15% 14.92%
--------------------------------------------------------------------------------
Class C shares - Before Taxes 26.10% 16.30%
--------------------------------------------------------------------------------
Class R shares - Before Taxes 27.83% 16.74%
--------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 28.19% 17.29%
--------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 28.50% 17.43%
--------------------------------------------------------------------------------
Russell 2000 Index(2) 18.37% 11.25%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 The Russell 2000 Index is an unmanaged index that measures the performance of small capitalization U.S. stocks. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
14 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE SMALL CAP LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID INSTITUTIONAL DIRECTLY FROM YOUR SERVICE INSTITUTIONAL INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed)(7) 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(7) 0.47% 0.46% 0.46% 0.66% 0.61% 0.46% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES(8) 1.67% 2.41% 2.41% 2.11% 1.56% 1.41% ------------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver/Expense Reimbursement 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 1.61% 2.35% 2.35% 2.05% 1.50% 1.35% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains, or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.01%, 0.20%, and 0.15%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Funds (the "Trust") and the Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.35% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.85% for Class A shares, 2.10% for Class R shares and 1.60% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
GARTMORE LEADERSHIP SERIES | 15
SECTION 1 GARTMORE SMALL CAP LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $729 $1,066 $1,425 $2,433
--------------------------------------------------------------------------------
Class B shares 738 1,046 1,480 2,472
--------------------------------------------------------------------------------
Class C shares 338 746 1,280 2,742
--------------------------------------------------------------------------------
Class R shares 208 655 1,128 2,437
--------------------------------------------------------------------------------
Institutional Service Class shares 153 487 844 1,851
--------------------------------------------------------------------------------
Institutional Class shares 137 440 765 1,686
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares 238 746 1,280 2,472
--------------------------------------------------------------------------------
Class C shares 238 746 1,280 2,742
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (uless yonur purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
16 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE U.S. GROWTH LEADERS FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term growth.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by U.S. Growth Leaders. The Fund typically focuses its investments in a core group of 25 to 35 COMMON STOCKS of companies of any size whose earnings are expected to grow faster than those of other companies in the market. The Fund may hold a limited number of additional common stocks at times when the portfolio managers are accumulating new positions, selling existing positions, or responding to exceptional market conditions.
The Fund is nondiversified, which means that it may invest a significant portion of the Fund's assets in the securities of a single or small number of companies. The Fund will invest 25% or more of its net assets in a group of companies in software and related technology industries.
The Fund usually sells portfolio securities if:
o it appears unlikely that earnings expectations will be met;
o the price of the security is or becomes overvalued;
o the outlook of a company's earnings growth becomes less attractive and/or
o more favorable opportunities are identified.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Standard & Poor's 500(R) Index (S&P 500 Index), or other funds with similar investment objectives and strategies.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
NONDIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
CONCENTRATION RISK - investing 25% or more of the Fund's net assets in a select group of companies in software and related technology industries could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of securities and industries.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE LEADERSHIP SERIES | 17
SECTION 1 GARTMORE U.S. GROWTH LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ----------------------------------------------------- -14.20% -23.00% 53.90% 12.38% 11.64% -0.91% |
BEST QUARTER: 24.50% - 2ND QTR. OF 2003
WORST QUARTER: -15.70% - 2ND QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (JUNE 30, 2000)
--------------------------------------------------------------------------------
Class A shares - Before Taxes -6.64% 6.79% 0.48%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions -6.64% 6.38% -0.10%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares -4.31% 5.64% 0.06%
--------------------------------------------------------------------------------
Class B shares - Before Taxes -6.49% 7.04% 0.71%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2, 3) -2.55% 7.32% 0.80%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) -1.24% 7.69% 0.96%
--------------------------------------------------------------------------------
Institutional Service Class shares-
Before Taxes -0.70% 8.21% 1.62%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) -0.59% 8.32% 1.69%
--------------------------------------------------------------------------------
S&P 500 Index(5) 15.79% 6.19% 1.28%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class C shares (3/1/01) and Class R shares (10/01/03) are based on the previous performance of Class B shares. This performance is substantially similar to what Class C and Class R shares would have produced, because all classes invest in the same portfolio of securities. Class C performance has been adjusted to reflect applicable sales charges. Returns for Class R shares have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect its lower expenses.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for Institutional Class shares have not been adjusted to reflect its lower expenses.
5 The S&P 500 Index is an unmanaged, market capitalization-weighted index of 500 widely held stocks of large-cap U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
18 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE U.S. GROWTH LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID INSTITUTIONAL DIRECTLY FROM YOUR SERVICE INSTITUTIONAL INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed)(7) 0.89% 0.89% 0.89% 0.89% 0.89% 0.89% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(8) 0.32% 0.28% 0.28% 0.48% 0.41% 0.28% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES(9) 1.46% 2.17% 2.17% 1.87% 1.30% 1.17% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 30 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base management fee depending on the assets in the Fund, and (2) upward or downward depending on the Fund's performance relative to its benchmark, the S&P 500 Index. Therefore, the management fee stated in the table above reflects, to the extent applicable, adjustments based on the Fund's assets and the Fund's performance relative to its benchmark as of October 31, 2006. Depending on the performance of the Fund, the management fee at the Fund's current asset level could range from 0.68% at its lowest to 1.12% at its highest. For more information, including a chart that shows the range of the minimum to maximum performance-based fees at all breakpoint levels, see Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.04%, 0.20%, and 0.13%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.30% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.80% for Class A shares, 2.05% for Class R shares and 1.55% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
GARTMORE LEADERSHIP SERIES | 19
SECTION 1 GARTMORE U.S. GROWTH LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses, and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $715 $1,010 $1,327 $2,221
--------------------------------------------------------------------------------
Class B shares 720 979 1,364 2,239
--------------------------------------------------------------------------------
Class C shares 320 679 1,164 2,503
--------------------------------------------------------------------------------
Class R shares 190 588 1,011 2,190
--------------------------------------------------------------------------------
Institutional Service Class shares 132 412 713 1,568
--------------------------------------------------------------------------------
Institutional Class shares 119 372 644 1,420
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $220 $679 $1,164 $2,239
--------------------------------------------------------------------------------
Class C shares 220 679 1,164 2,503
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
20 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE WORLDWIDE LEADERS FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital growth.
o companies that appear to offer long-term strategic growth opportunities because of their strong competitive advantage within key growth segments and
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by companies located throughout the world (including the U.S.) that management believes are, or have the potential to be, Worldwide Leaders. Some of the companies will be multi-national companies operating globally, while others will be located in, and primarily tied economically to one country. Under normal conditions, the Fund invests in securities from at least three different countries.
The Fund's portfolio manager evaluates which industries appear to offer the most attractive growth rates and which companies have earnings potential greater than that expected by the stock markets in which their securities are traded. Proprietary research is conducted in order to form an independent perspective that provides a basis for valuing stocks. By comparing its own valuations of individual companies to those of the market, the portfolio manager pinpoints companies whose prospects appear different from the consensus.
The Fund also may use DERIVATIVES, such as futures and options, for efficient portfolio management.
The Fund is nondiversified, which means that a significant portion of the Fund's assets may be invested in the securities of a single or small number of companies. Typically, the Fund holds approximately 30-40 COMMON STOCKS.
The Adviser has chosen Gartmore Global Partners as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Morgan Stanley Capital International (MSCI) World Index(SM), or other funds with similar investment objectives and strategies.
NONDIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
DERIVATIVES RISK - the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE LEADERSHIP SERIES | 21
SECTION 1 GARTMORE WORLDWIDE LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ----------------------------------------------------- -22.50% -18.70% 36.50% 15.00% 18.99% 25.48% |
BEST QUARTER: 19.71% - 2ND QTR. OF 2003
WORST QUARTER: -18.41% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (AUG. 30, 2000)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 18.31% 12.40% 2.58%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 18.32% 12.39% 2.57%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares 12.12% 10.88% 2.22%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 19.67% 12.73% 2.82%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2, 3) 23.65% 12.98% 2.90%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 24.95% 13.31% 3.06%
--------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 25.54% 13.88% 3.72%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) 25.91% 14.02% 3.82%
--------------------------------------------------------------------------------
MSCI World Index(5) 20.65% 10.49% 3.22%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class C shares (3/1/01) and Class R shares (10/1/03) are based on the previous performance of Class B shares. This performance is substantially similar to what Class C and Class R shares would have produced, because all classes invest in the same portfolio of securities. Class C performance has been adjusted to reflect applicable sales charges. Returns for Class R shares have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect its lower expenses.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for Institutional Class shares have not been adjusted to reflect its lower expenses.
5 The MSCI World Index is an unmanaged, free float-adjusted, market capitalization-weighted index that measures the performance of global developed-market equities. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
22 | GARTMORE LEADERSHIP SERIES
SECTION 1 GARTMORE WORLDWIDE LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID INSTITUTIONAL DIRECTLY FROM YOUR SERVICE INSTITUTIONAL INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed)(7) 0.99% 0.99% 0.99% 0.99% 0.99% 0.99% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(8) 0.38% 0.34% 0.34% 0.54% 0.59% 0.34% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 1.62% 2.33% 2.33% 2.03% 1.58% 1.33% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A and Class D Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends, or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base management fee depending on the assets in the Fund, and (2) upward or downward by up to 0.10% (+/-) depending on the Fund's performance relative to its benchmark, the MSCI World Index. Therefore, the management fee stated in the table above reflects, to the extent applicable, adjustments based on the Fund's assets and the Fund's performance relative to its benchmark as of October 31, 2006. Depending on the performance of the Fund, the management fee at the Fund's current asset level could range from 0.80% at its lowest to 1.00% at its highest. For more information, including a chart that shows the range of the minimum to maximum performance-based fees at all breakpoint levels, see Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.04%, 0.20%, and 0.25%, respectively. The full 0.25% in administrative services fees for Class A and Class R shares is not reflected in "Other Expenses" at this time because the Fund does not currently sell Class A or Class R shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.40% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waiver/Reimbursements)" could increase to 1.90% for Class A shares and 2.15% for Class R shares before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
GARTMORE LEADERSHIP SERIES | 23
SECTION 1 GARTMORE WORLDWIDE LEADERS FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $730 $1,057 $1,406 $2,386
--------------------------------------------------------------------------------
Class B shares 736 1,027 1,445 2,406
--------------------------------------------------------------------------------
Class C shares 336 727 1,245 2,666
--------------------------------------------------------------------------------
Class R shares 206 637 1,093 2,358
--------------------------------------------------------------------------------
Institutional Service Class shares 161 499 860 1,878
--------------------------------------------------------------------------------
Institutional Class shares 135 421 729 1,601
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------------
Class B shares $236 $727 $1,245 $2,406
---------------------------------------------------------------------------------
Class C shares 236 727 1,245 2,666
---------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
24 | GARTMORE LEADERSHIP SERIES
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - Each of the Funds could lose value if the individual stocks in which it has invested and/or the overall stock markets on which the stocks trade decline in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
FOREIGN SECURITIES RISK - Foreign securities in which a Fund may invest may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities; the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market); and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
DEPOSITARY RECEIPTS - Certain Funds may invest in securities of foreign issuers in the form of depositary receipts, such as American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which typically are issued by local financial institutions and evidence ownership of the underlying securities.
Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Depositary receipts may or may not be jointly sponsored by the underlying issuer. The issuers of unsponsored depositary receipts are not obligated to disclose information that is, in the United States, considered material. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Certain depositary receipts are not listed on an exchange and therefore may be considered to be illiquid securities.
PREFERRED STOCK - a class of stock that often pays dividends at a specified rate and has preference over common stock in dividend payments and liquidation of assets. Preferred stock may be convertible into common stock.
CONVERTIBLE SECURITIES - are generally debt securities or preferred stocks that may be converted into common stock. Convertibles typically pay current income as either interest (debt security convertibles) or dividends (preferred stocks). A convertible's value usually reflects both the stream of current income payments and the value of the underlying common stock. The market value of a convertible performs like that of a regular debt security, that is, if market interest rates rise, the value of a convertible usually falls. Since it is convertible into common stock, the convertible also has the same types of market and issuer risk as the underlying common stock.
WARRANTS - securities that give the holder the right to buy common stock at a specified price for a specified period of time. Warrants are considered speculative and have no value if they are not exercised before their expiration date.
GARTMORE LEADERSHIP SERIES | 25
SECTION 2 FUND DETAILS (CONT.)
DERIVATIVES - a derivative is a contract with its value based on the performance of an underlying financial asset, index or other measure. For example, an option is a derivative because its value changes in relation to the performance of an underlying stock. The value of an option on a futures contract varies with the value of the underlying futures contract, which in turn varies with the value of the underlying commodity or security. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways. Some risks of investing in derivatives include:
o the other party to the derivatives contract may fail to fulfill its obligations;
o their use may reduce liquidity and make the Fund harder to value, especially in declining markets;
o the Fund may suffer disproportionately heavy losses relative to the amount invested and
o changes in the value of derivatives may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
SECURITIES LENDING - Each of the Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances, these events could trigger adverse tax consequences to a Fund.
TEMPORARY INVESTMENTS - Each of the Funds generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances, and interest-bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the address and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
26 | GARTMORE LEADERSHIP SERIES
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER AND SUBADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Fund's respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
In connection with the transactions proposed pursuant to the Purchase Agreement, the Board of Trustees of the Trust has also approved the appointment of NorthPointe Capital, LLC ("NorthPointe") as subadviser to the growth portion of the Gartmore Small Cap Leaders Fund, and of Nationwide Separate Accounts LLC ("NSA") as subadviser to the Gartmore Mid Cap Growth Leaders Fund. The portfolio management teams that currently manage on behalf of the Adviser the growth portion of the Gartmore Small Cap Leaders Fund and the Gartmore Mid Cap Growth Leaders Fund are also employed by NorthPointe and NSA, respectively. NorthPointe and NSA currently are affiliates of the Adviser. The appointments of NorthPointe and NSA as subadvisers to the growth portion of the Gartmore Small Cap Leaders Fund and the Gartmore Mid Cap Growth Leaders Fund, respectively, are subject to the approval of the Funds' respective shareholders.
Gartmore Global Partners ("GGP"), 8 Fenchurch Place, London, England, United Kingdom, is the subadviser for the Gartmore Worldwide Leaders Fund and manages the Fund's assets in accordance with the investment objective and strategies. GGP makes investment decisions and executes them by placing purchase and sell orders for securities. Effective September 29, 2006, GGP ceased to be an affiliate of either the Adviser or NWD Investments.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
A discussion of the basis for the Board of Trustees' approval of the investment advisory agreements for the Funds will be available in the Funds' semiannual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
MANAGEMENT FEES
Each Fund pays its respective investment adviser a base management fee based on each Fund's average daily net assets. From its management fee, the Adviser pays GGP a subadvisory fee on the Gartmore Worldwide Leaders Fund's average daily net assets.
PERFORMANCE-BASED FEES: GARTMORE NATIONWIDE LEADERS FUND AND GARTMORE WORLDWIDE LEADERS FUND
Each of the Gartmore Nationwide Leaders Fund and the Gartmore Worldwide Leaders Fund pays a performance-based fee to the Adviser. This performance-based fee can vary depending on the Fund's performance relative to its respective benchmark. This fee is intended to either reward or penalize the Adviser for outperforming or underperforming, respectively, each such Fund's benchmark. The Funds' benchmarks for determining these performance-based fees are:
-------------------------------------------------------------------------------- Gartmore Nationwide Leaders Fund S&P 500 Index -------------------------------------------------------------------------------- Gartmore Worldwide Leaders Fund MSCI World Index -------------------------------------------------------------------------------- |
The calculation of this fee is done in two separate steps. First, the Fund pays a base fee (to be paid at the end of each quarter), as adjusted for any applicable breakpoints as described in the chart shown below under the heading "Management and Subadvisory Fees" (the "Base Fee Breakpoints"). The base fee rate results in an annual fee, calculated and accrued daily. The fee rate is applied to each such Fund's average net assets over that quarter. Second, a performance adjustment percentage is applied to the Fund's average net assets over the 12-month rolling performance period. The performance adjustment amount is then added to (or subtracted from, as applicable) the base fee to arrive at the Fund's total advisory fee for the most recently completed quarterly sub period and that total fee is paid at the end of that most recently completed quarter.
GARTMORE LEADERSHIP SERIES | 27
SECTION 3 FUND MANAGEMENT (CONT.)
The performance fee calculation applies to all of a Fund's share classes equally, based on the performance of the Class A shares, during the performance period. The table below shows the performance adjustment rate applicable to each Fund's base fee (as such base fee may be adjusted by Base Fee Breakpoints, as described under "Management and Subadvisory Fees").
--------------------------------------------------------------------------------
OUT OR UNDERPERFORMANCE CHANGE IN FEES
+/- 1 percentage point +/- 0.02%
+/- 2 percentage points +/- 0.04%
+/- 3 percentage points +/- 0.06%
+/- 4 percentage points +/- 0.08%
+/- 5 percentage points +/- 0.10%
--------------------------------------------------------------------------------
|
These performance-adjusted advisory fees are paid quarterly. The SAI contains more detailed information about any possible performance adjustments.
Under these performance fee arrangements, the Adviser can receive a performance fee increase even if a Fund experiences negative performance that still exceeds its benchmark by more than the relevant percentage amount shown above.
PERFORMANCE-BASED FEES: GARTMORE U.S. GROWTH LEADERS FUND
The Gartmore U.S. Growth Leaders Fund pays a performance-based fee to the Adviser. This performance based fee can vary depending on the Fund's performance relative to its benchmark, the S&P 500 Index. This fee is intended to either reward or penalize the Adviser for outperforming or underperforming, respectively, the S&P 500 Index.
The calculation of this fee is done in two separate steps. First, the Fund pays a base fee (to be paid at the end of each quarter), as adjusted for any applicable Base Fee Breakpoints as described in the chart shown below under the heading "Management and Subadvisory Fees." The base fee rate results in an annual fee, calculated and accrued daily. The fee rate is applied to such Fund's average net assets over that quarter. Second, a performance adjustment percentage is applied to the Fund's average net assets over the 36-month rolling performance period. The performance adjustment amount is then added to (or subtracted from, as applicable) the base fee to arrive at the Fund's total advisory fee for the most recently completed quarterly sub-period, and that total fee is paid at the end of that most recently completed quarter. The SAI contains more detailed information about any possible performance adjustments.
The performance fee calculation applies to all of the Fund's share classes equally, based on the performance of Class A Shares.
Thus, if the Fund outperforms the S&P 500 Index by 12% or more over a 36-month rolling period, the Fund will pay the maximum management fees listed below. Conversely, if the Fund underperforms the S&P 500 Index by 12% or more over a 36-month rolling period, the Fund will pay the minimum management fees listed below. No adjustment will take place if the under- or overperformance is less than 12%. The base fee and the performance adjustment percentage are then added (or subtracted, as applicable) to arrive at the Fund's overall advisory fee for the current period. Under this performance fee arrangement, the Adviser can receive a performance fee increase even if the Fund experiences negative performance that still exceeds its benchmark by more than 12%.
28 | GARTMORE LEADERSHIP SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
The table below shows the base management fees, as well as the maximum and minimum performance-adjusted fees, if applicable, and actual management fees paid during the fiscal year ended October 31, 2006. With respect to the Gartmore Worldwide Leaders Fund, the table also shows the base subadvisory fee, as well as the maximum and minimum performance-adjusted subadvisory fee, if applicable, and actual subadvisory fees paid during the same period. It does not take into account any applicable waivers.
---------------------------------------------------------------------------------------------------------------------------
MINIMUM FEE BASE FEE MAXIMUM FEE
NET ASSETS MANAGEMENT SUBADVISORY MANAGEMENT SUBADVISORY MANAGEMENT SUBADVISORY
GARTMORE MID CAP GROWTH LEADERS FUND
----------------------------------------------------------------------------------------------------------------------------
On assets up to $250 million - - 0.80% - - -
----------------------------------------------------------------------------------------------------------------------------
On assets of $250 million up to $1 billion - - 0.77% - - -
----------------------------------------------------------------------------------------------------------------------------
On assets of $1 billion up to $2 billion - - 0.74% - - -
----------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion up to $5 billion - - 0.71% - - -
----------------------------------------------------------------------------------------------------------------------------
On assets of $5 billion and more - - 0.68% - - -
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
GARTMORE NATIONWIDE LEADERS FUND
----------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.70% - 0.80% - 0.90% -
----------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.60% - 0.70% - 0.80% -
----------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.55% - 0.65% - 0.75% -
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP LEADERS FUND
----------------------------------------------------------------------------------------------------------------------------
All assets - - 0.95% - - -
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
GARTMORE U.S. GROWTH LEADERS FUND
----------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.68% - 0.90% - 1.12% -
----------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.62% - 0.80% - 0.98% -
----------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.59% - 0.75% - 0.91% -
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
GARTMORE WORLDWIDE LEADERS FUND
----------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.80% 0.350% 0.90% 0.450% 1.00% 0.550%
----------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.75% 0.325% 0.85% 0.425% 0.95% 0.525%
----------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.70% 0.300% 0.80% 0.400% 0.90% 0.500%
----------------------------------------------------------------------------------------------------------------------------
|
MANAGEMENT FEES SUBADVISORY FEES
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 0.80% n/a
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 0.85% n/a
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 0.95% n/a
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 0.89% n/a
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund* 0.99% 0.45%
--------------------------------------------------------------------------------
|
* NWD Management & Research Trust (formerly known as Gartmore Global Asset Management Trust) was the investment adviser to the Gartmore Worldwide Leaders Fund until September 29, 2006 when it transferred all of its investment advisory responsibilities to its wholly-owned investment advisory subsidiary, the Adviser.
GARTMORE LEADERSHIP SERIES | 29
SECTION 3 FUND MANAGEMENT (CONT.)
PORTFOLIO MANAGEMENT
GARTMORE MID CAP GROWTH LEADERS FUND
Joseph C. O'Connor is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. Mr. O'Connor is a portfolio manager with the Fund's Adviser. He also is a managing director of Nationwide Separate Accounts LLC, an affiliate of the Adviser, where he is primarily responsible for the management of the mid-cap portfolio. Previously, Mr. O'Connor was senior vice president, managing director and board member of GROUPAMA Asset Management N.A. ("GROUPAMA"), which he joined in 2000. In May 2003, NWD Investments Group acquired GROUPAMA, which is now named Nationwide Separate Accounts LLC and assumed the investment advisory and operational responsibilities of GROUPAMA.
GARTMORE NATIONWIDE LEADERS FUND
Gary D. Haubold, CFA, senior portfolio manager, is responsible for the day-to-day management of the Fund, including the selection of the Fund's investments. Mr. Haubold currently also manages or co-manages the Gartmore Nationwide Fund, the Gartmore Small Cap Fund, the Gartmore Small Cap Leaders Fund, the Gartmore GVIT Nationwide Fund and the Gartmore GVIT Nationwide Leaders Fund.
Mr. Haubold joined the Adviser in December 2003 from Edge Capital Management, an equity hedge fund he founded in 2000. Between 1997 and 2000, he was the senior portfolio manager on several small-, mid- and large-cap value funds at Pilgrim Baxter & Associates. Prior to Pilgrim Baxter, Mr. Haubold was a senior portfolio manager at Miller Anderson and Sherrard, LLP, which is now part of Morgan Stanley Asset Management. Mr. Haubold has over 20 years of investment management experience.
GARTMORE SMALL CAP LEADERS FUND
Carl P. Wilk, senior portfolio manager of the Small Cap Growth Team, and Gary Haubold, senior portfolio manager of the Small Cap Value Team, are co-portfolio managers, responsible for day-to-day management of the Fund.
SMALL CAP GROWTH TEAM MEMBERS
Mr. Wilk, CFP, joined the Adviser in April 2002. He currently also manages or co-manages the Gartmore Micro Cap Equity Fund and the NorthPointe Small Cap Growth Fund.
Previously, Mr. Wilk was senior portfolio manager and partner of Munder Capital Management and portfolio manager of the Munder MicroCap Equity Fund, as well as co-manager of the Munder Small Company Growth Fund. Mr. Wilk also managed the small-company focus style for institutional and wrap accounts for Munder Capital Management. Mr. Wilk has more than 17 years experience managing micro- and small-capitalization securities.
Karl Knas, CPA, joined the Small Cap Growth Team in March 2003. Previously, he was an equity research analyst at SoundView Technology Group from August 2001. Between February and August 2001, he was an equity research associate at Salomon Smith Barney. From January 2000 through February 2001, he was in business development at Telution, a software company.
SMALL CAP VALUE TEAM MEMBERS
Gary D. Haubold, CFA, has over 20 years of investment experience and joined the Adviser in December 2003 from Edge Capital Management, an equity hedge fund he founded in 2000. See "Gartmore Nationwide Leaders Fund" above for more information regarding Mr. Haubold's investment management experience.
William Gerlach joined the Small Cap Value Team in December 2003. He currently also manages or co-manages the Gartmore Global Natural Resources Fund, the Gartmore Small Cap Fund, the Gartmore Small Cap Value Fund and a portion of each of the GVIT Small Company Fund and the GVIT Small Cap Value Fund.
From 1991 until he joined the Adviser, he held numerous positions at Morgan Stanley Investment Management--Miller Anderson and Sherrard, LLP. He was team leader for Mid and Small Cap Equity, managing core and value investment styles.
Charles Purcell joined the Small Cap Value Team in December 2003. He currently also co-manages the Gartmore Small Cap Fund, the Gartmore Small Cap Value Fund and a portion of each of the GVIT Small Company Fund and the GVIT Small Cap Value Fund.
From 1994, he held numerous positions at Morgan Stanley Investment Management--Miller Anderson and Sherrard, LLP, including co-portfolio manager for both Mid Cap Core and Mid Cap Value portfolios.
30 | GARTMORE LEADERSHIP SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
GARTMORE U.S. GROWTH LEADERS FUND
Christopher Baggini, senior portfolio manager, and Douglas Burtnick, portfolio manager, are responsible for the day-to-day management of the Fund, including the selection of the Fund's investments.
Mr. Baggini joined the Adviser in March 2000. Previously, he served as portfolio manager for Allied Investment Advisors from November 1996 to March 2000. Mr. Baggini also manages the Gartmore Growth Fund, the Gartmore U.S. Growth Leaders Long-Short Fund, the Gartmore GVIT Growth Fund and the Gartmore GVIT U.S. Growth Leaders Fund.
Mr. Burtnick joined the Adviser in May 2002. He came from Brown Brothers Harriman & Company where he served from 2000 to 2002 as a portfolio manager and a risk manager in the private client group. From 1998 to 2000, he worked at Barra, Inc., a risk management firm, where he led a group focused on portfolio construction and risk management for institutional investors and hedge funds. Mr. Burtnick also manages or co-manages the Gartmore Global Financial Services Fund, the Gartmore Global Health Sciences Fund, the Gartmore Growth Fund, the Gartmore U.S. Growth Leaders Long-Short Fund, the Gartmore GVIT Global Financial Services Fund, the Gartmore GVIT Global Health Sciences Fund, the Gartmore GVIT Growth Fund and the Gartmore GVIT U.S. Growth Leaders Fund.
GARTMORE WORLDWIDE LEADERS FUND
Neil Rogan is the portfolio manager of the Gartmore Worldwide Leaders Fund and has managed the Fund since January 12, 2001. Mr. Rogan joined Gartmore Global Partners in September 1997 as head of Asia Pacific Equities. In December 1999, he was appointed head of International Equities with responsibility for the Asia Pacific, Emerging Markets, Japanese, U.S. and Global Equities management teams. In January 2001, Mr. Rogan accepted responsibility for the Global Equity Team.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, each of the Funds (except the Gartmore Worldwide Leaders Fund) is directly managed by the Adviser; the Gartmore Worldwide Leaders Fund is subadvised by Gartmore Global Partners. If a new non-affiliated subadviser is hired for the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows the Funds greater flexibility enabling them to operate more efficiently.
Should the Adviser hire a subadviser, the Adviser would perform the following oversight and evaluation services to the Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
GARTMORE LEADERSHIP SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class D, Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class and Institutional Class shares may be more suitable than Class A, Class D, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS D, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A AND
CLASS D SHARES
Front-end sales charge up to A front-end sales charge means that a portion
5.75% for Class A shares and of your initial investment goes toward the
4.50% for Class D shares sales charge and is not invested.
Contingent deferred sales Reduction and waivers of sales charges may be
charge (CDSC)(1) (Class A available.
shares only)
Annual service and/or 12b-1 Total annual operating expenses are lower than
fee of 0.25% (Class A shares Class B and Class C charges which means
only) Administrative services higher dividends and/or NAV per share.
fee of up to 0.25%
No conversion feature.
No maximum investment amount.
--------------------------------------------------------------------------------
CLASS B SHARES
No front-end sales charge means your full
CDSC up to 5.00% investment immediately goes toward buying
shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines 1% in most years to zero
after six years.
Total annual operating expenses are higher than
Annual service and/or 12b-1 Class A expenses which means lower dividends
fee of 1.00% and/or NAV per share.
No administrativeservices fee Automatic conversion to Class A shares after
seven years, which means lower annual
expenses in the future.
Maximum investment amount of $100,000. Larger
investments may be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
No front-end sales charge means your full
CDSC of 1.00% investment immediately goes toward buying
shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines to zero after one year.
Total annual operating expenses are higher than
Annual service and/or 12b-1 Class A expenses which means lower dividends
fee of 1.00% and/or NAV per share.
No administrativeservices fee No conversion feature.
Maximum investment amount of $1,000,000(2).
Larger investments may be rejected.
--------------------------------------------------------------------------------
|
1 Unless you are otherwise eligible to purchase Class A shares without a sales charge, a CDSC of up to 1.00% will be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
32 | GARTMORE LEADERSHIP SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
--------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
-----------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
-----------------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
-----------------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
-----------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
-----------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
-----------------------------------------------------------------------------------
$1 million or more None None None*
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|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
CLASS D SHARES
Class D shares are available to the following:
o Investors who received Class D shares of a Fund in the reorganization of Nationwide Investing Foundation, Nationwide Investing Foundation II and Financial Horizons Investment Trust into Gartmore Mutual Funds in May 1998, as long as you purchase the Class D shares through the same account in the same capacity and
o Persons eligible to purchase Class D shares without a sales charge as described below and in the SAI.
FRONT-END SALES CHARGES FOR CLASS D SHARES
--------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
-----------------------------------------------------------------------------------
Less than $50,000 4.50% 4.71% 4.00%
-----------------------------------------------------------------------------------
$50,000 to $99,999 4.00 4.17 3.50
-----------------------------------------------------------------------------------
$100,000 to $249,999 3.00 3.09 2.50
-----------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 1.75
-----------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.25
-----------------------------------------------------------------------------------
$1 million to $24,999,999 0.50 0.50 0.50
-----------------------------------------------------------------------------------
$25 million or more None None None
-----------------------------------------------------------------------------------
|
REDUCTION AND WAIVER OF CLASS A AND CLASS D SALES CHARGES
If you qualify for a reduction or waiver of Class A or Class D sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current net asset value. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries; and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent, and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A and Class D Sales Charges" and "Waiver of Class A and Class D Sales Charges" below and "Reduction of Class A and Class D Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A AND CLASS D SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A and Class D shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (as shown in the table above), you and other family members living at the same address can add the value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital
GARTMORE LEADERSHIP SERIES | 33
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchase of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
Front-end sales charges on Class A and Class D shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges. (Class A shares only);
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker- dealer that has a dealer/selling agreement with the Distributor. (Class A shares only);
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares if the new Fund does not offer Class D shares and Class A shares are purchased instead;
o retirement plans (Class A shares only);
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 1.00% applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason; or
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES
-------------------------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE --------------------------------------------------------------------------------- If sold within 18 months 18 months 18 months --------------------------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% --------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B, and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund(s) is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares sold following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70 1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
34 | GARTMORE LEADERSHIP SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
If you qualify for a waiver of a CDSC, you must notify Customer Service, your financial adviser or intermediary at the time of purchase and must also provide any required evidence showing that you qualify. For more complete information, see the SAI.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
------------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
------------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
------------------------------------------------------------------------------------
|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower Fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after you purchase them you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges-Class A, Class B, and Class C Shares" for a list of situations where a CDSC is not charged.
The Funds offer Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
o the appropriate level and type of fee to compensate the intermediary. An intermediary may receive different compensation depending on which class is chosen.
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial services firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans that have at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
GARTMORE LEADERSHIP SERIES | 35
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Funds;
o retirement plans for which no third-party administrator receives compensation from the Funds;
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of of the Adviser, its affiliates and their corporate sponsors, subsidiaries; and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative service fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Class D, Institutional Class and Institutional Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
--------------------------------------------------------------------------------
CLASS AS A OF % DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
|
ADMINISTRATIVE SERVICES FEES
Class A, Class D, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by the Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A, Class D, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class D, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
36 | GARTMORE LEADERSHIP SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to www.nwdfunds.com 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
GARTMORE LEADERSHIP SERIES | 37
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS D, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' transfer agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. *EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON 60
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND THE DAYS WRITTEN NOTICE TO SHAREHOLDERS.
OFFERING OF SHARES AT ANY TIME. **A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
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THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, exchange intermediaries who are authorized to accept purchase, exchange
and redemption orders for the Funds. Your transaction is and redemption orders for the Funds. Your transaction is
processed at the NAV next calculated after the Funds' agent or processed at the NAV next calculated after the Funds' agent or
an authorized intermediary receives your order in proper form. an authorized intermediary receives your order in proper form.
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BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. dollars mailing or faxing a letter to Gartmore Funds. The letter must
and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT CASH, STARTER include your account number(s) and the name(s) of the Fund(s)
CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, CREDIT CARD you wish to exchange from and to. The letter must be signed by
CHECKS OR MONEY ORDERS. all account owners. We reserve the right to request original
documents for any faxed requests.
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BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The Funds unless you decline this option on your application. The Funds
follow procedures to confirm that telephone instructions are follow procedures to confirm that telephone instructions are
genuine and will not be liable for any loss, injury, damage or genuine and will not be liable for any loss, injury, damage or
expense that results from executing such instructions. The Funds expense that results from executing such instructions. The
may revoke telephone privileges at any time, without notice to Funds may revoke telephone privileges at any time, without
shareholders. notice to shareholders. For redemptions, shareholders who own
shares in an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made payable
to the shareholder(s) of record will be mailed to the address
of record.
The Funds may record telephone instructions to redeem shares,
and may request redemption instructions in writing, signed by
all shareholders on the account.
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ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line transactions website. However, the Funds may discontinue on-line
of Fund shares at any time. transactions of Fund shares at any time.
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BY BANK WIRE. You may have your bank transmit funds by federal BY BANK WIRE. The Funds can wire the proceeds of your
funds wire to the Funds' custodian bank. (The authorization will redemption directly to your account at a commercial bank. A
be in effect unless you give the Funds written notice of its voided check must be attached to your application. (The
termination.) authorization will be in effect unless you give the Funds
written notice of its termination.)
o if you choose this method to open a new account, you
must call our toll-free number before you wire your o your proceeds typically will be wired to your bank on the
investment and arrange to fax your completed application. next business day after your order has been processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the redemption
proceeds for this service.
o the wire must be received by 4:00 p.m. in order to
receive the current day's NAV. o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund your Gartmore BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds can
Funds' account with proceeds from your bank via ACH on the be sent to your bank via ACH on the second business day after
second business day after your purchase order has been your order has been processed. A voided check must be attached
processed. A voided check must be attached to your application. to your application. Money sent through ACH should reach your
Money sent through ACH typically reaches Gartmore Funds from bank in two business days. There is no fee for this service.
your bank in two business days. There is no fee for this (The authorization will be in effect unless you give the Funds
service. (The authorization will be in effect unless you give written notice of its termination.)
the Funds written notice of its termination.)
ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans or plan administrator regarding transactions. Retirement plans or
their administrators wishing to conduct transactions should call their administrators wishing to conduct transactions should
our toll-free number. Eligible entities or individuals wishing call our toll-free number. Eligible entities or individuals
to conduct transactions in Institutional Service Class or wishing to conduct transactions in Institutional Service Class
Institutional Class shares should call our toll-free number. or Institutional Class shares should call our toll-free number.
|
38 | GARTMORE LEADERSHIP SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
GARTMORE LEADERSHIP SERIES | 39
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS D, CLASS B AND CLASS C SHARES To open an account $ 2,000 (per Fund) To open an IRA account $ 1,000 (per Fund) Additional investments $ 100 (per Fund) To start an Automatic Asset Accumulation Plan $ 1,000 (per Fund) Additional Investments (Automatic Asset Accumulation Plan) $ 50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $ 50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $ 1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or other financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number, or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities.
Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days' written notice to shareholders.
Generally, there are no sales charges for exchanges of Class D, Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund with a lower sales charge to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
40 | GARTMORE LEADERSHIP SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund.)
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class D, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class, D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class D, Class B and Class C shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell, or in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or the Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in shares of the particular Fund at the Fund's then-current net asset value until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of the Funds in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
GARTMORE LEADERSHIP SERIES | 41
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage short-term or excessive trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or sales and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares,
depending on various factors such as the size of the Fund, the amount of assets
the Fund typically maintains in cash or cash equivalents, the dollar amount,
number and frequency of trades in Fund shares and other factors. Funds that
invest in foreign securities may be at greater risk for excessive trading.
Investors may attempt to take advantage of anticipated price movements in
securities held by the Funds based on events occurring after the close of a
foreign market that may not be reflected in a Fund's NAV (referred to as
"arbitrage market timing"). Arbitrage market timing may also be attempted in
funds that hold significant investments in small-cap securities, high-yield
(junk) bonds and other types of investments that may not be frequently traded.
There is the possibility that arbitrage market timing, under certain
circumstances, may dilute the value of Fund shares if redeeming shareholders
receive proceeds (and buying shareholders receive shares) based on NAVs that do
not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser; its subadvisers and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. They also have sole discretion to:
o restrict purchases or exchanges that they or their agents believe constitute excessive trading and
o reject transactions that violate a Fund's excessive trading policies or its exchange limits.
Each Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
Despite its best efforts, Gartmore Funds may be unable to identify or deter excessive trades conducted through certain intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, Gartmore Funds may not be able to prevent all market timing and its potential negative impact.
42 | GARTMORE LEADERSHIP SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability, and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70(1)/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 calendar days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 calendar days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose an exchange fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose an exchange fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund for less than the minimum holding period listed below:
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and
Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
GARTMORE LEADERSHIP SERIES | 43
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you can earn while you own Fund shares, as well as the federal income taxes you may have to pay. The amount of any distributions varies and there is no guarantee a Fund will pay either income dividends or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed as ordinary income. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
44 | GARTMORE LEADERSHIP SERIES
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND
OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, dividend and capital gain distributions generally are not subject to current federal income taxes. In general, these entities are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
You may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
GARTMORE LEADERSHIP SERIES | 45
SECTION 6 GARTMORE MID CAP GROWTH LEADERS FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31 or, if a Fund or a class has not been in operation for the past five years, for the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT VALUE, END
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES OF PERIOD TOTAL RETURN (a)
--------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 10.93 (0.14) (2.29) (2.43) $ 8.50 (22.23%)
Year Ended October 31, 2003 $ 8.50 (0.12) 2.92 2.80 $ 11.30 32.94%
Year Ended October 31, 2004 $ 11.30 (0.12) 0.34 0.22 $ 11.52 1.95%
Year Ended October 31, 2005 $ 11.52 (0.09) 2.32 2.23 $ 13.75 19.36%
Year Ended October 31, 2006 $ 13.75 (0.09) 1.45 1.36 $ 15.11 9.89%
--------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 10.40 (0.19) (2.18) (2.37) $ 8.03 (22.79%)
Year Ended October 31, 2003 $ 8.03 (0.18) 2.76 2.58 $ 10.61 32.13%
Year Ended October 31, 2004 $ 10.61 (0.18) 0.31 0.13 $ 10.74 1.23%
Year Ended October 31, 2005 $ 10.74 (0.19) 2.19 2.00 $ 12.74 18.62%
Year Ended October 31, 2006 $ 12.74 (0.19) 1.36 1.17 $ 13.91 9.18%
--------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 10.41 (0.19) (2.18) (2.37) $ 8.04 (22.77%)
Year Ended October 31, 2003 $ 8.04 (0.16) 2.74 2.58 $ 10.62 32.09%
Year Ended October 31, 2004 $ 10.62 (0.16) 0.29 0.13 $ 10.75 1.22%
Year Ended October 31, 2005 (h) $ 10.75 (0.18) 2.18 2.00 $ 12.75 18.60%
Year Ended October 31, 2006 $ 12.75 (0.18) 1.35 1.17 $ 13.92 9.18%
--------------------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $ 11.03 (0.11) (2.32) (2.43) $ 8.60 (22.03%)
Year Ended October 31, 2003 $ 8.60 (0.10) 2.97 2.87 $ 11.47 33.37%
Year Ended October 31, 2004 $ 11.47 (0.08) 0.34 0.26 $ 11.73 2.27%
Year Ended October 31, 2005 $ 11.73 (0.06) 2.38 2.32 $ 14.05 19.78%
Year Ended October 31, 2006 $ 14.05 (0.04) 1.49 1.45 $ 15.50 10.32%
--------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME
NET ASSETS RATIO OF INVESTMENT (PRIOR TO (LOSS) (PRIOR TO
AT END OF EXPENSES INCOME (LOSS) REIMBURSEMENTS) REIMBURSEMENTS)
PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TO AVERAGE PORTFOLIO
(000S) NET ASSETS NET ASSETS NET ASSETS (b) NET ASSETS (b) TURNOVER (c)
------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 4,880 1.59% (1.27%) 2.20% (1.88%) 432.60%
Year Ended October 31, 2003 $ 6,441 1.55% (1.27%) 1.99% (1.71%) 365.45%
Year Ended October 31, 2004 $ 5,769 1.50% (0.97%) 1.98% (1.44%) 405.85%
Year Ended October 31, 2005 $ 6,624 1.52% (0.74%) 1.82% (1.03%) 149.29%
Year Ended October 31, 2006 $ 6,926 1.48% (0.57%) 1.54% (0.64%) 164.51%
------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 3,005 2.25% (1.94%) 2.90% (2.59%) 432.60%
Year Ended October 31, 2003 $ 3,663 2.24% (1.96%) 2.68% (2.40%) 365.45%
Year Ended October 31, 2004 $ 3,324 2.20% (1.66%) 2.67% (2.13%) 405.85%
Year Ended October 31, 2005 $ 3,387 2.22% (1.43%) 2.52% (1.72%) 149.29%
Year Ended October 31, 2006 $ 3,096 2.17% (1.25%) 2.24% (1.32%) 164.51%
------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 45 2.25% (1.94%) 2.90% (2.59%) 432.60%
Year Ended October 31, 2003 $ 69 2.24% (1.96%) 2.69% (2.41%) 365.45%
Year Ended October 31, 2004 $ 77 2.20% (1.65%) 2.69% (2.14%) 405.85%
Year Ended October 31, 2005 (h) $ 429 2.23% (1.45%) 2.46% (1.69%) 149.29%
Year Ended October 31, 2006 $ 741 2.16% (1.29%) 2.23% (1.35%) 164.51%
------------------------------------------------------------------------------------------------------------------------------
CLASS D SHARES
Year Ended October 31, 2002 $ 10,192 1.27% (0.97%) 1.90% (1.60%) 432.60%
Year Ended October 31, 2003 $ 11,747 1.24% (0.96%) 1.69% (1.40%) 365.45%
Year Ended October 31, 2004 $ 10,857 1.20% (0.66%) 1.67% (1.13%) 405.85%
Year Ended October 31, 2005 $ 11,232 1.22% (0.43%) 1.52% (0.72%) 149.29%
Year Ended October 31, 2006 $ 10,614 1.17% (0.26%) 1.24% (0.33%) 164.51%
------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) Not annualized.
(e) Annualized.
(f) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(g) For the period from September 28, 2004 (commencement of operations) through October 31, 2004.
(h) Net investment income (loss) is based on average shares outstanding during the period.
46 | GARTMORE LEADERSHIP SERIES
SECTION 6 GARTMORE MID CAP GROWTH LEADERS FINANCIAL HIGHLIGHTS (CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM NET ASSET
BEGINNING INCOME (LOSSES) ON INVESTMENT VALUE, END
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES OF PERIOD TOTAL RETURN (a)
--------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (f) $ 11.47 (0.11) 0.32 0.21 $ 11.68 1.83%(d)
Year Ended October 31, 2005 $ 11.68 (0.11) 2.36 2.25 $ 13.93 19.26%
Year Ended October 31, 2006 $ 13.93 (0.09) 1.47 1.38 $ 15.31 9.91%
--------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (g) $ 11.23 (0.01) 0.51 0.50 $ 11.73 4.45%(d)
Year Ended October 31, 2005 $ 11.73 (0.05) 2.36 2.31 $ 14.04 19.69%
Year Ended October 31, 2006 $ 14.04 (0.05) 1.49 1.44 $ 15.48 10.26%
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME
NET ASSETS RATIO OF INVESTMENT (PRIOR TO (LOSS) (PRIOR TO
AT END OF EXPENSES INCOME (LOSS) REIMBURSEMENTS) REIMBURSEMENTS)
PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TO AVERAGE PORTFOLIO
(000S) NET ASSETS NET ASSETS NET ASSETS (b) NET ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (f) $ 1 1.72%(e) (1.16%)(e) 2.09%(e) (1.53%)(e) 405.85%
Year Ended October 31, 2005 $ 1 1.60% (0.83%) 1.90% (1.13%) 149.29%
Year Ended October 31, 2006 $ 1 1.53% (0.63%) 1.57% (0.66%) 164.51%
-----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (g) $ 1 1.08%(e) (0.69%)(e) 2.50%(e) (2.11%)(e) 405.85%
Year Ended October 31, 2005 $ 16,263 1.23% (0.51%) 1.43% (0.71%) 149.29%
Year Ended October 31, 2006 $ 14,894 1.17% (0.26%) 1.24% (0.33%) 164.51%
-----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) Not annualized.
(e) Annualized.
(f) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(g) For the period from September 28, 2004 (commencement of operations) through October 31, 2004.
(h) Net investment income (loss) is based on average shares outstanding during the period.
GARTMORE LEADERSHIP SERIES | 47
SECTION 6 GARTMORE NATIONWIDE LEADERS FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.02 (0.55) (0.53)
Year Ended October 31, 2003 $ 9.46 - 1.98 1.98
Year Ended October 31, 2004 $ 11.40 (0.04) 1.18 1.14
Year Ended October 31, 2005 $ 12.54 0.10 2.12 2.22
Year Ended October 31, 2006 $ 13.92 0.11 1.83 1.94
----------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.05) (0.55) (0.60)
Year Ended October 31, 2003 $ 9.40 (0.09) 1.97 1.88
Year Ended October 31, 2004 $ 11.27 (0.12) 1.17 1.05
Year Ended October 31, 2005 $ 12.32 0.03 2.05 2.08
Year Ended October 31, 2006 $ 13.62 0.02 1.78 1.80
----------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.05) (0.55) (0.60)
Year Ended October 31, 2003 $ 9.40 (0.08) 1.96 1.88
Year Ended October 31, 2004 $ 11.27 (0.12) 1.16 1.04
Year Ended October 31, 2005 $ 12.31 0.03 2.07 2.10
Year Ended October 31, 2006 $ 13.62 0.02 1.78 1.80
----------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 10.98 (0.01) 0.31 0.30
Year Ended October 31, 2004 $ 11.28 (0.08) 1.17 1.09
Year Ended October 31, 2005 $ 12.37 0.14 2.06 2.20
Year Ended October 31, 2006 $ 13.73 0.07 1.81 1.88
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
----------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
----------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) (0.01) - (0.01) $ 9.46 (5.34%)(f)
Year Ended October 31, 2003 (0.04) - (0.04) $ 11.40 20.97%
Year Ended October 31, 2004 - - - $ 12.54 10.00%
Year Ended October 31, 2005 (0.08) (0.76) (0.84) $ 13.92 18.12%
Year Ended October 31, 2006 (0.20) (1.49) (1.69) $ 14.17 15.16%
---------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) - - - $ 9.40 (6.00%)(f)
Year Ended October 31, 2003 (0.01) - (0.01) $ 11.27 20.08%
Year Ended October 31, 2004 - - - $ 12.32 9.32%
Year Ended October 31, 2005 (0.02) (0.76) (0.78) $ 13.62 17.25%
Year Ended October 31, 2006 (0.15) (1.49) (1.64) $ 13.78 14.35%
---------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) - - - $ 9.40 (6.00%)(f)
Year Ended October 31, 2003 (0.01) - (0.01) $ 11.27 20.08%
Year Ended October 31, 2004 - - - $ 12.31 9.32%
Year Ended October 31, 2005 (0.03) (0.76) (0.79) $ 13.62 17.30%
Year Ended October 31, 2006 (0.16) (1.49) (1.65) $ 13.77 14.32%
---------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) - - - $ 11.28 2.73%(f)
Year Ended October 31, 2004 - - - $ 12.37 9.66%
Year Ended October 31, 2005 (0.08) (0.76) (0.84) $ 13.73 18.19%
Year Ended October 31, 2006 (0.19) (1.49) (1.68) $ 13.93 14.87%
---------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) $ 891 1.45%(g) 0.23%(g) 4.93%(g) (3.25%)(g) 60.54%
Year Ended October 31, 2003 $ 1,351 1.45% (0.04%) 3.23% (1.82%) 196.86%
Year Ended October 31, 2004 $ 1,445 1.47% (0.31%) 2.61% (1.46%) 230.95%
Year Ended October 31, 2005 $ 5,309 1.51% 0.94% 1.80% 0.65% 522.67%
Year Ended October 31, 2006 $ 7,117 1.56% 0.72% 1.75% 0.52% 599.86%
--------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 317 2.20%(g) (0.58%)(g) 5.78%(g) (4.16%)(g) 60.54%
Year Ended October 31, 2003 $ 350 2.20% (0.74%) 4.11% (2.65%) 196.86%
Year Ended October 31, 2004 $ 410 2.20% (1.05%) 3.34% (2.20%) 230.95%
Year Ended October 31, 2005 $ 769 2.20% 0.32% 2.55% (0.04%) 522.67%
Year Ended October 31, 2006 $ 1,096 2.27% (0.06%) 2.47% (0.27%) 599.86%
--------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 243 2.21%(g) (0.60%)(g) 5.80%(g) (4.19%)(g) 60.54%
Year Ended October 31, 2003 $ 358 2.20% (0.82%) 3.95% (2.57%) 196.86%
Year Ended October 31, 2004 $ 404 2.20% (1.05%) 3.34% (2.20%) 230.95%
Year Ended October 31, 2005 $ 2,046 2.20% 0.40% 2.43% 0.18% 522.67%
Year Ended October 31, 2006 $ 3,606 2.27% (0.06%) 2.47% (0.27%) 599.86%
--------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 1 1.80%(g) (1.11%)(g) 1.90%(g) (1.21%)(g) 196.86%
Year Ended October 31, 2004 $ 1 1.81% (0.69%) 2.91% (1.79%) 230.95%
Year Ended October 31, 2005 $ 1 1.45% 1.04% 1.79% 0.70% 522.67%
Year Ended October 31, 2006 $ 2 1.80% 0.50% 2.02% 0.28% 599.86%
--------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 18, 2001 (commencement of operations) through October 31, 2002. Registration of shares effective with the Securities and Exchange Commission on December 28, 2001.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) Not annualized.
(g) Annualized.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(j) Net investment income (loss) is based on average shares outstanding during the period.
48 | GARTMORE LEADERSHIP SERIES
SECTION 6 GARTMORE NATIONWIDE LEADERS FUND FINANCIAL HIGHLIGHTS (CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.03 (0.55) (0.52)
Year Ended October 31, 2003 $ 9.47 - 1.99 1.99
Year Ended October 31, 2004 $ 11.42 (0.03) 1.18 1.15
Year Ended October 31, 2005 $ 12.57 0.12 2.12 2.24
Year Ended October 31, 2006 (j) $ 13.96 0.31 1.66 1.97
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 12.22 (0.01) 0.37 0.36
Year Ended October 31, 2005 $ 12.58 0.17 2.09 2.26
Year Ended October 31, 2006 $ 13.96 0.15 1.85 2.00
---------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
----------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
----------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) (0.01) - (0.01) $ 9.47 (5.23%)(f)
Year Ended October 31, 2003 (0.04) - (0.04) $ 11.42 21.10%
Year Ended October 31, 2004 - - - $ 12.57 10.07%
Year Ended October 31, 2005 (0.09) (0.76) (0.85) $ 13.96 18.23%
Year Ended October 31, 2006 (j) (0.09) (1.49) (1.58) $ 14.35 15.27%
---------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) - - - $ 12.58 2.95%(f)
Year Ended October 31, 2005 (0.12) (0.76) (0.88) $ 13.96 18.37%
Year Ended October 31, 2006 (0.23) (1.49) (1.72) $ 14.24 15.60%
---------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 778 1.32%(g) 0.39%(g) 4.74%(g) (3.03%)(g) 60.54%
Year Ended October 31, 2003 $ 1,395 1.38% 0.01% 3.06% (1.67%) 196.86%
Year Ended October 31, 2004 $ 2,377 1.41% (0.27%) 2.56% (1.42%) 230.95%
Year Ended October 31, 2005 $ 6,674 1.43% 0.98% 1.75% 0.66% 522.67%
Year Ended October 31, 2006 (j) $ 431 1.44% 2.27% 1.54% 2.18% 599.86%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 1 1.12%(g) (0.17%)(g) 2.44%(g) (1.50%)(g) 230.95%
Year Ended October 31, 2005 $ 1 1.20% 1.23% 1.77% 0.72% 522.67%
Year Ended October 31, 2006 $ 1 1.22% 1.08% 1.41% 0.89% 599.86%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 18, 2001 (commencement of operations) through October 31, 2002. Registration of shares effective with the Securities and Exchange Commission on December 28, 2001.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) Not annualized.
(g) Annualized.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(j) Net investment income (loss) is based on average shares outstanding during the period.
GARTMORE LEADERSHIP SERIES | 49
SECTION 6 GARTMORE SMALL CAP LEADERS FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
----------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
----------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2005 (d) $ 10.00 (0.01) 0.09 0.08
Year Ended October 31, 2006 $ 10.08 - 3.04 3.04
----------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2005 (d) $ 10.00 (0.02) 0.05 0.03
Year Ended October 31, 2006 $ 10.03 (0.04) 2.96 2.92
----------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005 (d) $ 10.00 (0.04) 0.08 0.04
Year Ended October 31, 2006 $ 10.04 (0.05) 2.98 2.93
----------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2005 (d) $ 10.00 (0.06) 0.11 0.05
Year Ended October 31, 2006 $ 10.05 -(g) 3.00 3.00
----------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2005 (d) $ 10.00 - 0.10 0.10
Year Ended October 31, 2006 $ 10.10 0.01 3.06 3.07
----------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (d) $ 10.00 (0.01) 0.12 0.11
Year Ended October 31, 2006 $ 10.11 0.07 3.02 3.09
----------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTION OF PERIOD RETURN (a)
------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2005 (d) - - - $ 10.08 0.80%(e)
Year Ended October 31, 2006 (0.02) (0.19) (0.21) $ 12.91 30.65%
------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2005 (d) - - - $ 10.03 0.30%(e)
Year Ended October 31, 2006 -(g) (0.19) (0.19) $ 12.76 29.55%
------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005 (d) - - - $ 10.04 0.40%(e)
Year Ended October 31, 2006 -(g) (0.19) (0.19) $ 12.78 29.63%
------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2005 (d) - - - $ 10.05 0.50%(e)
Year Ended October 31, 2006 (0.02) (0.19) (0.21) $ 12.84 30.32%
------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2005 (d) - - - $ 10.10 1.00%(e)
Year Ended October 31, 2006 (0.03) (0.19) (0.22) $ 12.95 30.83%
------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (d) - - - $ 10.11 1.10%(e)
Year Ended October 31, 2006 (0.03) (0.19) (0.22) $ 12.98 31.03%
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2005 (d) $ 5,449 1.80%(f) (0.20%)(f) 2.36%(f) (0.76%)(f) 372.55%
Year Ended October 31, 2006 $ 21,484 1.61% (0.05%) 1.66% (0.10%) 440.62%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2005 (d) $ 888 2.49%(f) (0.88%)(f) 3.00%(f) (1.39%)(f) 372.55%
Year Ended October 31, 2006 $ 1,783 2.35% (0.50%) 2.40% (0.55%) 440.62%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005 (d) $ 5,657 2.49%(f) (0.90%)(f) 3.04%(f) (1.45%)(f) 372.55%
Year Ended October 31, 2006 $ 11,686 2.35% (0.57%) 2.40% (0.63%) 440.62%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2005 (d) $ 1 2.26%(f) (0.74%)(f) 3.03%(f) (1.51%)(f) 372.55%
Year Ended October 31, 2006 $ 6 1.95% (0.46%) 1.99% (0.50%) 440.62%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2005 (d) $ 1 1.57%(f) (0.04%)(f) 2.21%(f) (0.69%)(f) 372.55%
Year Ended October 31, 2006 $ 86 1.50% (0.56%) 1.54% (0.60%) 440.62%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2005 (d) $ 4,045 1.49%(f) 0.05%(f) 2.29%(f) (0.89%)(f) 372.55%
Year Ended October 31, 2006 $ 5,308 1.35% 0.62% 1.40% 0.57% 440.62%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 29, 2004 (commencement of operations) through October 31, 2005.
(e) Not annualized.
(f) Annualized.
(g) Amount is less than $0.005.
50 | GARTMORE LEADERSHIP SERIES
SECTION 6 GARTMORE U.S. GROWTH LEADERS FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 6.02 (0.07) (0.46) (0.53)
Year Ended October 31, 2003 $ 5.49 (0.03) 2.76 2.73
Year Ended October 31, 2004 $ 8.22 (0.07) 0.34 0.27
Year Ended October 31, 2005 $ 8.49 (0.05) 1.52 1.47
Year Ended October 31, 2006 $ 9.96 (0.06) 0.27 0.21
---------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 5.96 (0.12) (0.44) (0.56)
Year Ended October 31, 2003 (d) $ 5.40 (0.11) 2.74 2.63
Year Ended October 31, 2004 $ 8.03 (0.13) 0.34 0.21
Year Ended October 31, 2005 $ 8.24 (0.12) 1.47 1.35
Year Ended October 31, 2006 $ 9.59 (0.11) 0.25 0.14
---------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (d) $ 6.00 (0.12) (0.44) (0.56)
Year Ended October 31, 2003 (d) $ 5.44 (0.13) 2.77 2.64
Year Ended October 31, 2004 $ 8.08 (0.11) 0.32 0.21
Year Ended October 31, 2005 $ 8.29 (0.15) 1.51 1.36
Year Ended October 31, 2006 $ 9.65 (0.11) 0.25 0.14
---------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 7.49 (0.01) 0.56 0.55
Year Ended October 31, 2004 $ 8.04 (0.11) 0.34 0.23
Year Ended October 31, 2005 $ 8.27 - 1.44 1.44
Year Ended October 31, 2006 $ 9.71 (0.07) 0.25 0.18
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 (d) $ 6.06 (0.06) (0.46) (0.52)
Year Ended October 31, 2003 $ 5.54 (0.03) 2.80 2.77
Year Ended October 31, 2004 $ 8.31 (0.09) 0.37 0.28
Year Ended October 31, 2005 $ 8.59 (0.07) 1.56 1.49
Year Ended October 31, 2006 $ 10.08 (0.06) 0.30 0.24
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 8.62 (0.02) (0.01) (0.03)
Year Ended October 31, 2005 $ 8.59 (0.03) 1.55 1.52
Year Ended October 31, 2006 $ 10.11 (0.02) 0.26 0.24
---------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------
NET NET ASSET
REALIZED TOTAL VALUE, END TOTAL
GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 - - $ 5.49 (8.80%)
Year Ended October 31, 2003 - - $ 8.22 49.73%
Year Ended October 31, 2004 - - $ 8.49 3.28%
Year Ended October 31, 2005 - - $ 9.96 17.31%
Year Ended October 31, 2006 (0.60) (0.60) $ 9.57 1.77%(k)
--------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 - - $ 5.40 (9.40%)
Year Ended October 31, 2003 (d) - - $ 8.03 48.70%
Year Ended October 31, 2004 - - $ 8.24 2.62%
Year Ended October 31, 2005 - - $ 9.59 16.38%
Year Ended October 31, 2006 (0.60) (0.60) $ 9.13 1.18%(k)
--------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (d) - - $ 5.44 (9.33%)
Year Ended October 31, 2003 (d) - - $ 8.08 48.53%
Year Ended October 31, 2004 - - $ 8.29 2.60%
Year Ended October 31, 2005 - - $ 9.65 16.41%
Year Ended October 31, 2006 (0.60) (0.60) $ 9.19 1.18%(k)
--------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) - - $ 8.04 7.34%(f)
Year Ended October 31, 2004 - - $ 8.27 2.86%
Year Ended October 31, 2005 - - $ 9.71 17.41%
Year Ended October 31, 2006 (0.60) (0.60) $ 9.29 1.60%(k)
--------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 (d) - - $ 5.54 (8.58%)
Year Ended October 31, 2003 - - $ 8.31 50.00%
Year Ended October 31, 2004 - - $ 8.59 3.37%
Year Ended October 31, 2005 - - $ 10.08 17.35%
Year Ended October 31, 2006 (0.60) (0.60) $ 9.72 1.95%(k)
--------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) - - $ 8.59 (0.35%)(f)
Year Ended October 31, 2005 - - $ 10.11 17.69%
Year Ended October 31, 2006 (0.60) (0.60) $ 9.75 2.16%(k)
--------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO EXPENSES INCOME (LOSS)
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME (LOSS) MENTS) TO MENTS) TO
PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,356 1.57% (1.20%) 3.04% (2.67%) 773.95%
Year Ended October 31, 2003 $ 8,714 1.59% (1.02%) 2.10% (1.54%) 637.45%
Year Ended October 31, 2004 $ 21,273 1.64% (1.06%) 1.80% (1.23%) 510.91%
Year Ended October 31, 2005 $ 76,762 1.56% (0.89%) (i) (i) 442.04%
Year Ended October 31, 2006 $ 86,364 1.46%(j) (0.52%)(j) 1.48%(j) (0.54%)(j) 389.34%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 719 2.26% (1.89%) 3.88% (3.51%) 773.95%
Year Ended October 31, 2003 (d) $ 2,023 2.30% (1.72%) 2.96% (2.38%) 637.45%
Year Ended October 31, 2004 $ 2,572 2.30% (1.71%) 2.45% (1.86%) 510.91%
Year Ended October 31, 2005 $ 4,253 2.24% (1.53%) (i) (i) 442.04%
Year Ended October 31, 2006 $ 6,072 2.15%(j) (1.24%)(j) 2.18%(j) (1.27%)(j) 389.34%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 (d) $ 16 2.27% (1.89%) 3.69% (3.31%) 773.95%
Year Ended October 31, 2003 (d) $ 1,606 2.30% (1.76%) 2.60% (2.07%) 637.45%
Year Ended October 31, 2004 $ 4,000 2.30% (1.74%) 2.47% (1.91%) 510.91%
Year Ended October 31, 2005 $ 22,774 2.22% (1.56%) (i) (i) 442.04%
Year Ended October 31, 2006 $ 36,040 2.15%(j) (1.23%)(j) 2.18%(j) (1.25%)(j) 389.34%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (e) $ 1 1.90%(g) (1.64%)(g) 2.00%(g) (1.74%)(g) 637.45%
Year Ended October 31, 2004 $ 1 1.89% (1.33%) 2.20% (1.64%) 510.91%
Year Ended October 31, 2005 $ 637 1.54% (0.93%) (i) (i) 442.04%
Year Ended October 31, 2006 $ 1,037 1.70%(j) (0.79%)(j) 1.72%(j) (0.80%)(j) 389.34%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 (d) $ 853 1.32% (0.95%) 2.52% (2.15%) 773.95%
Year Ended October 31, 2003 $ 6,563 1.50% (0.94%) 2.00% (1.44%) 637.45%
Year Ended October 31, 2004 $ 7,008 1.54% (0.93%) 1.68% (1.08%) 510.91%
Year Ended October 31, 2005 $ 8,806 1.48% (0.77)% (i) (i) 442.04%
Year Ended October 31, 2006 $ 719 1.30%(j) (0.11%)(j) 1.33%(j) (0.14%)(j) 389.34%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 234 1.30%(g) (0.83%)(g) 1.54%(g) (1.07%)(g) 510.91%
Year Ended October 31, 2005 $ 1,737 1.23% (0.55%) (i) (i) 442.04%
Year Ended October 31, 2006 $ 4,601 1.17%(j) (0.29%)(j) 1.19%(j) (0.31%)(j) 389.34%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) Net investment income (loss) is based on average shares outstanding during the period.
(e) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(f) Not annualized.
(g) Annualized.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(i) There were no fee reductions in this period.
(j) Excludes reimbursement from the Investment Adviser.
(k) Includes reimbursement from the Investment Adviser which increased the total return by 0.11%.
GARTMORE LEADERSHIP SERIES | 51
SECTION 6 GARTMORE WORLDWIDE LEADERS FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 6.26 - (0.76) (0.76)
Year Ended October 31, 2003 $ 5.50 (0.02) 1.53 1.51
Year Ended October 31, 2004 $ 7.01 0.05 0.46 0.51
Year Ended October 31, 2005 $ 7.52 (0.02) 1.78 1.76
Year Ended October 31, 2006 $ 9.25 0.04 2.38 2.42
---------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 6.20 (0.04) (0.75) (0.79)
Year Ended October 31, 2003 (d) $ 5.41 (0.04) 1.48 1.44
Year Ended October 31, 2004 $ 6.85 - 0.45 0.45
Year Ended October 31, 2005 $ 7.30 (0.05) 1.71 1.66
Year Ended October 31, 2006 $ 8.94 (0.02) 2.27 2.25
---------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 6.23 (0.04) (0.75) (0.79)
Year Ended October 31, 2003 $ 5.44 (0.06) 1.51 1.45
Year Ended October 31, 2004 $ 6.89 - 0.44 0.44
Year Ended October 31, 2005 $ 7.33 (0.05) 1.71 1.66
Year Ended October 31, 2006 $ 8.97 (0.01) 2.28 2.27
---------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (g) $ 6.55 (0.01) 0.32 0.31
Year Ended October 31, 2004 $ 6.86 0.02 0.45 0.47
Year Ended October 31, 2005 $ 7.33 (0.03) 1.75 1.72
Year Ended October 31, 2006 $ 9.02 0.01 2.31 2.32
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 6.29 0.01 (0.76) (0.75)
Year Ended October 31, 2003 $ 5.54 - 1.54 1.54
Year Ended October 31, 2004 $ 7.08 0.05 0.47 0.52
Year Ended October 31, 2005 $ 7.60 (0.01) 1.79 1.78
Year Ended October 31, 2006 (d) $ 9.35 0.02 2.42 2.44
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 7.23 0.02 0.35 0.37
Year Ended October 31, 2005 $ 7.60 0.01 1.80 1.81
Year Ended October 31, 2006 $ 9.37 0.07 2.40 2.47
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL VALUE, END TOTAL
INCOME DISTRIBUTIONS OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 - - $ 5.50 (12.14%)
Year Ended October 31, 2003 - - $ 7.01 27.45%
Year Ended October 31, 2004 - - $ 7.52 7.28%
Year Ended October 31, 2005 (0.03) (0.03) $ 9.25 23.44%
Year Ended October 31, 2006 (0.05) (0.05) $ 11.62 26.22%
---------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 - - $ 5.41 (12.74%)
Year Ended October 31, 2003 (d) - - $ 6.85 26.62%
Year Ended October 31, 2004 - - $ 7.30 6.57%
Year Ended October 31, 2005 (0.02) (0.02) $ 8.94 22.70%
Year Ended October 31, 2006 (0.01) (0.01) $ 11.18 25.22%
---------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 - - $ 5.44 (12.68%)
Year Ended October 31, 2003 - - $ 6.89 26.65%
Year Ended October 31, 2004 - - $ 7.33 6.39%
Year Ended October 31, 2005 (0.02) (0.02) $ 8.97 22.81%
Year Ended October 31, 2006 (0.02) (0.02) $ 11.22 25.19%
---------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (g) - - $ 6.86 4.73%(e)
Year Ended October 31, 2004 - - $ 7.33 7.00%
Year Ended October 31, 2005 (0.03) (0.03) $ 9.02 23.33%
Year Ended October 31, 2006 (0.04) (0.04) $ 11.30 25.78%
---------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 - - $ 5.54 (11.92%)
Year Ended October 31, 2003 - - $ 7.08 27.80%
Year Ended October 31, 2004 - - $ 7.60 7.34%
Year Ended October 31, 2005 (0.03) (0.03) $ 9.35 23.48%
Year Ended October 31, 2006 (d) (0.05) (0.05) $ 11.74 26.17%
---------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) - - $ 7.60 5.12%(e)
Year Ended October 31, 2005 (0.04) (0.04) $ 9.37 23.81%
Year Ended October 31, 2006 (0.06) (0.06) $ 11.78 26.49%
---------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO EXPENSES INCOME (LOSS)
OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME (LOSS) MENTS) TO MENTS) TO
PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,046 1.69% (0.03%) 2.60% (0.94%) 467.35%
Year Ended October 31, 2003 $ 34,889 1.67% (0.47%) (i) (i) 689.06%
Year Ended October 31, 2004 $ 30,707 1.70% 0.53% 1.85% 0.38% 495.62%
Year Ended October 31, 2005 $ 32,404 1.69% (0.26%) 1.94% (0.50%) 352.57%
Year Ended October 31, 2006 $ 41,219 1.62% 0.42% 1.68% 0.36% 298.51%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 936 2.39% (0.72%) 3.36% (1.69%) 467.35%
Year Ended October 31, 2003 (d) $ 96 2.39% (0.72%) (i) (i) 689.06%
Year Ended October 31, 2004 $ 122 2.40% (0.13%) 2.57% (0.30%) 495.62%
Year Ended October 31, 2005 $ 343 2.41% (0.94%) 2.64% (1.18%) 352.57%
Year Ended October 31, 2006 $ 806 2.33% (0.24%) 2.40% (0.31%) 298.51%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 19 2.39% (0.71%) 3.41% (1.73%) 467.35%
Year Ended October 31, 2003 $ 19 2.38% (0.84%) (i) (i) 689.06%
Year Ended October 31, 2004 $ 25 2.40% (0.08%) 2.57% (0.25%) 495.62%
Year Ended October 31, 2005 $ 676 2.41% (0.90%) 2.65% (1.15%) 352.57%
Year Ended October 31, 2006 $ 3,795 2.32% (0.26%) 2.40% (0.33%) 298.51%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2003 (g) $ 1 1.87%(f) (1.05%)(f) 1.97%(f) (1.15%)(f) 689.06%
Year Ended October 31, 2004 $ 1 1.96% 0.28% 2.12% 0.12% 495.62%
Year Ended October 31, 2005 $ 1 1.75% (0.33%) 1.75% (0.34%) 352.57%
Year Ended October 31, 2006 $ 2 1.92% 0.11% 1.98% 0.06% 298.51%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 1,133 1.42% 0.25% 2.34% (0.67%) 467.35%
Year Ended October 31, 2003 $ 1,400 1.46% 0.12% (i) (i) 689.06%
Year Ended October 31, 2004 $ 1,373 1.65% 0.61% 1.80% 0.46% 495.62%
Year Ended October 31, 2005 $ 3,883 1.64% (0.15%) 1.89% (0.40%) 352.57%
Year Ended October 31, 2006 (d) $ 20 1.65% 0.15% 1.70% 0.11% 298.51%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 1 1.40%(f) 0.72%(f) 1.70%(f) 0.42%(f) 495.62%
Year Ended October 31, 2005 $ 1 1.40% 0.04% 1.73% (0.32%) 352.57%
Year Ended October 31, 2006 $ 2 1.32% 0.72% 1.42% 0.62% 298.51%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) Net investment income (loss) is based on average shares outstanding during the period.
(e) Not annualized.
(f) Annualized.
(g) For the period from October 1, 2003 (commencement of operations) through October 31, 2003.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(i) There were no fee reductions in this period.
52 | GARTMORE LEADERSHIP SERIES
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. -
9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for
closing share prices. Also, visit the Gartmore Funds' website at
www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov;
o by electronic request to publicinfo@sec.gov;
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-LDRS 2/07
SECTOR Series
Gartmore Global Financial Services Fund
Gartmore Global Health Sciences Fund
Gartmore Global Natural Resources Fund
Gartmore Global Technology and Communications Fund
Gartmore Global Utilities Fund
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime..
WWW.NWDFUNDS.COM
SECTOR Series
These specialty Funds feature sector portfolios focused on specific industries, including financial services, health sciences, natural resources, technology and utilities.
-------------------------------------------------------------------------------- FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore Global Financial Services Fund Class A GLFAX -------------------------------------------------------------------------------- Gartmore Global Financial Services Fund Class B GLFBX -------------------------------------------------------------------------------- Gartmore Global Financial Services Fund Class C GLFCX -------------------------------------------------------------------------------- Gartmore Global Financial Services Fund Class R GLFRX -------------------------------------------------------------------------------- Gartmore Global Financial Services Fund Institutional Class GLFIX -------------------------------------------------------------------------------- Gartmore Global Financial Services Fund Institutional Service Class GFISX -------------------------------------------------------------------------------- Gartmore Global Health Sciences Fund Class A GLSAX -------------------------------------------------------------------------------- Gartmore Global Health Sciences Fund Class B GLSBX -------------------------------------------------------------------------------- Gartmore Global Health Sciences Fund Class C GMSCX -------------------------------------------------------------------------------- Gartmore Global Health Sciences Fund Class R GGHRX -------------------------------------------------------------------------------- Gartmore Global Health Sciences Fund Institutional Class GGHIX -------------------------------------------------------------------------------- Gartmore Global Health Sciences Fund Institutional Service Class GLSIX -------------------------------------------------------------------------------- Gartmore Global Natural Resources Fund Class A GGNAX -------------------------------------------------------------------------------- Gartmore Global Natural Resources Fund Class B GGNBX -------------------------------------------------------------------------------- Gartmore Global Natural Resources Fund Class C GGNCX -------------------------------------------------------------------------------- Gartmore Global Natural Resources Fund Class R GGNRX -------------------------------------------------------------------------------- Gartmore Global Natural Resources Fund Institutional Class GGNIX -------------------------------------------------------------------------------- Gartmore Global Natural Resources Fund Institutional Service Class GGNSX -------------------------------------------------------------------------------- Gartmore Global Technology and Communications Fund Class A GAGTX -------------------------------------------------------------------------------- Gartmore Global Technology and Communications Fund Class B GBGTX -------------------------------------------------------------------------------- Gartmore Global Technology and Communications Fund Class C GCGTX -------------------------------------------------------------------------------- Gartmore Global Technology and Communications Fund Class R GGTRX -------------------------------------------------------------------------------- Gartmore Global Technology and Communications Fund Institutional Class GGTIX -------------------------------------------------------------------------------- Gartmore Global Technology and Communications Fund Institutional Service Class GIGTX -------------------------------------------------------------------------------- Gartmore Global Utilities Fund Class A GGUAX -------------------------------------------------------------------------------- Gartmore Global Utilities Fund Class B GGUBX -------------------------------------------------------------------------------- Gartmore Global Utilities Fund Class C GGUCX -------------------------------------------------------------------------------- Gartmore Global Utilities Fund Class R GLURX -------------------------------------------------------------------------------- Gartmore Global Utilities Fund Institutional Class GLUIX -------------------------------------------------------------------------------- Gartmore Global Utilities Fund Institutional Service Class GUISX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND PERFORMANCE
Gartmore Global Financial Services Fund
Gartmore Global Health Sciences Fund
Gartmore Global Natural Resources Fund
Gartmore Global Technology and
Communications Fund
Gartmore Global Utilities Fund
25 SECTION 2: FUND DETAILS
Additional Information about Investments,
Investment Techniques and Risks
27 SECTION 3: FUND MANAGEMENT
Investment Adviser and Subadviser
Portfolio Management
Multi-Manager Structure
31 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
44 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other Tax-Deferred Accounts
Backup Withholding
46 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE SECTOR SERIES | 1
SECTOR Series
INTRODUCTION TO THE SECTOR SERIES
This prospectus provides information about five funds (the "Funds"), the shares of which are offered by Gartmore Mutual Funds (the "Trust"):
Gartmore Global Financial Services Fund
Gartmore Global Health Sciences Fund
Gartmore Global Natural Resources Fund
Gartmore Global Technology and Communications Fund
Gartmore Global Utilities Fund
These Funds are primarily intended:
o To help investors seek to grow their capital by pursuing investment opportunities in specific market sectors with dynamic prospects.
Because the Funds concentrate their investments in particular sectors of the economy, they may involve substantially higher risks and greater volatility than other mutual funds and may not be appropriate for conservative investors. To decide if one or more of these Funds is appropriate for your investment program, you should consider your personal investment objectives and financial circumstances, the length of time until you need your money and the amount of risk you are comfortable taking.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
Each Fund offers six different share classes--Class A, Class B, Class C, Class R, Institutional Service Class and Institutional Class. An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Each Fund may employ a "multi-manager" structure, which means that Gartmore Mutual Fund Capital Trust (the "Adviser"), as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE SECTOR SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMODITY-LINKED DERIVATIVES - investments that are linked to, and therefore provide exposure to, the investment returns of physical assets that trade in the commodities markets without actually investing in such physical assets themselves.
EQUITY SECURITIES - securities including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts, that represent an ownership interest in the issuer. They may also include interests in real estate investment trusts.
EMERGING MARKET COUNTRIES - developing and low or middle income countries as identified by the International Finance Corporation or the World Bank. Emerging market countries may be found in regions such as Asia, Latin America, Eastern Europe, the Middle East and Africa.
GROWTH STYLE - a style of investing in equity securities of companies that the Fund's management believes have above-average rates of earnings growth and which therefore may experience above-average increases in stock price.
LARGE-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Standard & Poor's(S&P) 500(R) Index, ranging from $1.4 billion to $446.9 billion as of December 31, 2006.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
MID-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell Midcap(R) Index, ranging from $1.19 billion to $20.34 billion as of January 31, 2007.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
GARTMORE SECTOR SERIES | 3
SECTION 1 GARTMORE GLOBAL FINANCIAL SERVICES FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital growth.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by U.S. and foreign companies (including those located in EMERGING MARKET COUNTRIES) with business operations in or related to financial services. A company that is eligible for investment by the Fund typically derives at least 50% of its revenues, net income or assets from the financial services sector. The Fund is nondiversified, and may invest a significant portion of its assets in the securities of a single issuer or a small number of issuers. The Fund also concentrates at least 25% of its net assets in at least one or more of the following industry groups:
o banks and savings and loans;
o consumer and industrial finance companies;
o investment banks;
o insurance brokers;
o insurance companies;
o securities brokers and advisers;
o real estate-related companies and
o leasing companies.
The portfolio manager aims to provide strong performance by investing in companies that the portfolio manager believes
o have the potential to deliver unexpected earnings growth and
o have prospects for earnings growth that the market has underestimated.
Just as importantly, the portfolio manager attempts to avoid companies whose earnings are likely to fall short of expectations.
The Fund may invest in financial services companies of any size, including established LARGE-CAP COMPANIES that are expected to grow with the market and SMALL-CAP and MID-CAP COMPANIES that may offer strong prospects for future growth.
The portfolio manager typically sells a security if it no longer offers potential for unexpected earnings growth. The portfolio manager specifically monitors:
o earnings revisions and surprises;
o stock price performance and
o any information indicating a change in the industry or franchise assessment of a company.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities. These risks may be enhanced in emerging market countries.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Morgan Stanley Capital International (MSCI) World Financials Index(SM), or other funds with similar investment objectives and strategies.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small- and mid-cap companies may be more volatile and less liquid than larger company stocks.
NONDIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
CONCENTRATION RISK - investing 25% or more of the Fund's net assets in a select group of companies in financial services industries could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of securities and industries.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL FINANCIAL SERVICES FUND SUMMARY AND PERFORMANCE
(CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2002 2003 2004 2005 2006 ------------------------------------------- -10.24% 40.84% 20.39% 10.61% 19.74% |
BEST QUARTER: 22.35% - 2ND QTR. OF 2003
WORST QUARTER: -19.98% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR 5 YEARS (DEC. 18, 2001)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 12.83% 13.69% 13.93%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 11.34% 12.02% 12.26%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions and Sales
of Shares 8.92% 11.06% 11.28%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 13.86% 13.97% 14.32%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2) 17.93% 14.21% 14.44%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 19.35% 14.55% 14.78%
--------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 19.99% 15.34% 15.57%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) 20.08% 15.34% 15.57%
--------------------------------------------------------------------------------
MSCI World Financials Index(5) 24.49% 14.13% 14.15%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class R shares (12/30/03) are based on the previous performance of Class B shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. Returns have been adjusted to eliminate sales charges that do not apply to Class R shares, but have not been adjusted to reflect its lower expenses.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Class have not been adjusted to reflect its lower expenses.
5 The MSCI World Financials Index is an unmanaged index that is based on developed-market country indexes and is generally representative of the stocks in the global financial services sector. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE SECTOR SERIES | 5
SECTION 1 GARTMORE GLOBAL FINANCIAL SERVICES FUND SUMMARY AND PERFORMANCE
(CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
-----------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES CLASS SHARES CLASS SHARES
-----------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
-----------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
-----------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee
(as a percentage of amount
redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
-----------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
-----------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed)(7) 0.87% 0.87% 0.87% 0.87% 0.87% 0.87%
-----------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other distribution
activities, as well as certain shareholder
servicing costs) 0.25% 1.00% 1.00% 0.50% None None
-----------------------------------------------------------------------------------------------------------------------------
Other Expenses(8) 0.40% 0.38% 0.38% 0.58% 0.40% 0.38%
-----------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES(9) 1.52% 2.25% 2.25% 1.95% 1.27% 1.25%
-----------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base management fee depending on the assets in the Fund, and (2) upward or downward by up to 0.10% depending on the Fund's performance relative to its benchmark, the MSCI World Financials Index. Therefore, the management fee stated in the table above reflects, to the extent applicable, adjustments based on the Fund's assets and the Fund's performance relative to its benchmark as of October 31, 2006. Depending on the performance of the Fund, the management fee at the Fund's current asset level could range from 0.80% at its lowest to 1.00% at its highest. For more information, including a chart that shows the range of the minimum to maximum performance-based fees at all breakpoint levels, see Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.02%, 0.20% and 0.02%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.40% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/ Reimbursements)" could increase to 1.90% for Class A shares, 2.15% for Class R shares and 1.65% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
6 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL FINANCIAL SERVICES FUND SUMMARY AND PERFORMANCE
(CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $721 $1,028 $1,356 $2,283
--------------------------------------------------------------------------------
Class B shares 728 1,003 1,405 2,315
--------------------------------------------------------------------------------
Class C shares 328 703 1,205 2,585
--------------------------------------------------------------------------------
Class R shares 198 612 1,052 2,275
--------------------------------------------------------------------------------
Institutional Service Class shares 129 403 697 1,534
--------------------------------------------------------------------------------
Institutional Class shares 127 397 686 1,511
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $228 $703 $1,205 $2,315
--------------------------------------------------------------------------------
Class C shares 228 703 1,205 2,585
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE SECTOR SERIES | 7
SECTION 1 GARTMORE GLOBAL HEALTH SCIENCES FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by U.S. and foreign companies (including those located in EMERGING MARKET COUNTRIES) with business operations in or related to health sciences. A company that is eligible for investment by the Fund typically derives at least 50% of its revenues, net income or assets from health sciences. The Fund is nondiversified, and may invest a significant portion of its assets in the securities of a single issuer or a small number of issuers. The Fund also concentrates at least 25% of its net assets in at least one or more of the following industry groups:
o biotechnology;
o health care;
o medical services and devices;
o medical supplies and
o pharmaceuticals.
In analyzing specific companies for possible investment, the Fund's portfolio manager ordinarily looks for several of the following characteristics:
o above-average per share earnings growth;
o evidence of positive fundamental change;
o high return on invested capital;
o a healthy balance sheet;
o sound financial and accounting policies and overall financial strength;
o strong competitive advantages;
o effective research, product development and marketing;
o strong management and
o general operating characteristics that enable the company to compete successfully.
The Fund may invest in health sciences companies of any size, including established LARGE-CAP COMPANIES that are expected to grow with the market and SMALL-CAP and MID-CAP COMPANIES that may offer strong prospects for future growth.
The portfolio manager considers selling a security when any of these factors changes materially or when an alternative investment provides more attractive risk/return characteristics.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities. These risks may be enhanced in emerging market countries.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Goldman Sachs (GS) Healthcare Index, or other funds with similar investment objectives and strategies.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small-and mid-cap companies may be more volatile and less liquid than larger company stocks.
NON-DIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
CONCENTRATION RISK - investing 25% or more of the Fund's net assets in a select group of companies in health sciences industries could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of securities and industries.
If the value of the Fund's investments goes down, you may lose money.
8 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL HEALTH SCIENCES FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------ 1.10% -19.58% 36.77% 8.19% 7.67% 2.41% |
BEST QUARTER: 20.00% - 2ND QTR. OF 2003
WORST QUARTER: -17.40% - 1ST QTR. OF 2001
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
--------------------------------------------------------------------------------
SINCE
INCEPTION
(DEC. 29,
1 YEAR 5 YEARS 2000)
--------------------------------------------------------------------------------
Class A shares - Before Taxes -3.49% 4.33% 3.80%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions -3.49% 3.40% 3.02%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions
and Sales of Shares -2.27% 3.30% 2.91%
--------------------------------------------------------------------------------
Class B shares - Before Taxes -3.27% 4.55% 4.15%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2, 3) 0.73% 4.88% 4.15%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 2.09% 5.19% 4.40%
--------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 2.65% 5.78% 5.08%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) 2.83% 5.87% 5.15%
--------------------------------------------------------------------------------
GS Healthcare Index(5) 5.42% 4.09% 11.80%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class C shares (9/20/02) and Class R shares (12/30/03) are based on the previous performance of Class B shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class C and Class R shares would have produced because all classes invest in the same portfolio of securities. Returns for these classes have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Class have not been adjusted to reflect its lower expenses.
5 The GS Healthcare Index is an unmanaged, market capitalization-weighted index that is generally representative of the stocks in the health care sector. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE SECTOR SERIES | 9
SECTION 1 GARTMORE GLOBAL HEALTH SCIENCES FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID DIRECTLY FROM INSTITUTIONAL SERVICE INSTITUTIONAL YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed)(7) 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(8) 0.47% 0.38% 0.38% 0.58% 0.54% 0.38% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES(9) 1.57% 2.23% 2.23% 1.93% 1.39% 1.23% ------------------------------------------------------------------------------------------------------------------------------------ Acquired Fund (Indirect Underlying Fund) Annual Operating Expenses(10) 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL DIRECT AND ACQUIRED FUND ANNUAL OPERATING EXPENSES 1.61% 2.27% 2.27% 1.97% 1.43% 1.27% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A Shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class-- Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base management fee depending on the assets in the Fund, and (2) upward or downward by up to 0.10% depending on the Fund's performance relative to its benchmark, the GS Healthcare Index. Therefore, the management fee stated in the table above reflects, to the extent applicable, adjustments based on the Fund's assets and the Fund's performance relative to its benchmark as of October 31, 2006. Depending on the performance of the Fund, the management fee at the Fund's current asset level could range from 0.80% at its lowest to 1.00% at its highest. For more information, including a chart that shows the range of the minimum to maximum performance-based fees at all breakpoint levels, see Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.09%, 0.20%, and 0.16%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written agreement limiting operating expenses to 1.40% for all share classes at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any such reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses" could increase to 1.90% for Class A, 2.15% for Class R and 1.65% for Institutional Service Class shares of the Fund before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
10 Reflects the Fund's investment in shares of one or more other investment companies, as permitted by the Fund's policies.
10 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL HEALTH SCIENCES FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
---------------------------------------------------------------------------
Class A shares* $ 729 $ 1,054 $ 1,401 $ 2,376
---------------------------------------------------------------------------
Class B shares 730 1,009 1,415 2,362
---------------------------------------------------------------------------
Class C shares 330 709 1,215 2,605
---------------------------------------------------------------------------
Class R shares 200 618 1,062 2,296
---------------------------------------------------------------------------
Institutional Service Class shares 146 452 782 1,713
---------------------------------------------------------------------------
Institutional Class shares 129 403 697 1,534
---------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------------------------------------
Class B shares $ 230 $ 709 $ 1,215 $ 2,362
---------------------------------------------------------------------------
Class C shares 230 709 1,215 2,605
---------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE SECTOR SERIES | 11
SECTION 1 GARTMORE GLOBAL NATURAL RESOURCES FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital growth
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by U.S. and foreign companies of any size (including those located in EMERGING MARKET COUNTRIES) with business operations in or related to activities in natural resources industries. A company that is eligible for investment by the Fund typically derives at least 50% of its revenues, net income or assets from the natural resources sector. Companies in natural resources industries may include those that:
o participate in the discovery and development of natural resources;
o own or produce natural resources;
o engage in the transportation, distribution, or processing of natural resources;
o contribute new technologies for the production or efficient use of natural resources, such as systems for energy conversion, conservation, and pollution control and
o provide related services such as mining, drilling, chemicals and related parts and equipment.
The Fund is nondiversified, and may invest a significant portion of its assets in the securities of a single issuer or a small number of issuers. The Fund also concentrates at least 25% of its net assets in at least one or more of the following industry groups:
o agricultural products;
o alternative energy sources;
o base metal production;
o building materials;
o chemicals;
o coal;
o energy services and technology;
o environmental services;
o ferrous and nonferrous metals;
o forest products;
o gold and other precious metals;
o integrated oil;
o steel and iron ore production;
o oil and gas exploration and production;
o paper products and
o real estate.
The portfolio managers aim to provide strong performance by investing in companies they believe
o have the potential to deliver unexpected earnings growth and
o have prospects for earnings growth that the market has underestimated.
The Fund may invest in natural resources companies of any size, including established LARGE-CAP COMPANIES that are expected to grow with the market and SMALL-CAP and MID-CAP COMPANIES that may offer strong prospects for future growth.
The portfolio managers maintain a strong selling discipline by:
o reviewing securities for potential sale if the price reaches a predetermined level,
o evaluating a security within the context of applicable historic trends and
o focusing on both economic and specific news about the security.
In pursuing its investment objective, the Fund also may invest in COMMODITY-LINKED DERIVATIVES. The value of a commodity-linked derivative typically is based on the price movements of the physical commodities to which it is linked or to a commodity index that measures the value of commodities or the commodities markets.
12 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL NATURAL RESOURCES FUND SUMMARY AND PERFORMANCE (CONT.)
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities. These risks may be enhanced in emerging market countries.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Goldman Sachs (GS) Natural Resources Index, or other funds with similar investment objectives and strategies.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small- and mid-cap companies may be more volatile and less liquid than larger company stocks.
NONDIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
CONCENTRATION RISK - investing 25% or more of the Fund's net assets in a select group of companies in natural resources industries could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of securities and industries.
DERIVATIVES RISK - the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE SECTOR SERIES | 13
SECTION 1 GARTMORE GLOBAL NATURAL RESOURCES FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad- based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2005 2006 --------------- 65.48% 20.29% |
BEST QUARTER: 28.91% - 3RD QTR. OF 2005
WORST QUARTER: -6.75% - 3RD QTR. OF 2006
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR (JUNE 29, 2004)
-------------------------------------------------------------------------
Class A shares -Before Taxes 13.36% 38.96%
-------------------------------------------------------------------------
Class A shares -After Taxes on Distributions 8.59% 34.50%
-------------------------------------------------------------------------
Class A shares -After Taxes on Distributions
and Sales of Shares 9.12% 31.47%
-------------------------------------------------------------------------
Class B shares -Before Taxes 14.44% 40.49%
-------------------------------------------------------------------------
Class C shares -Before Taxes 18.42% 41.22%
-------------------------------------------------------------------------
Class R shares -Before Taxes 19.97% 41.81%
-------------------------------------------------------------------------
Institutional Service Class shares -Before
Taxes 20.60% 42.54%
-------------------------------------------------------------------------
Institutional Class shares - Before Taxes 20.65% 42.65%
-------------------------------------------------------------------------
GS Natural Resources Index(2) 16.82% 26.13%
-------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 The GS Natural Resources Index is an unmanaged, modified market capitalization-weighted sector index of U.S.-traded natural resource- related stocks, including companies in the categories of extractive industries, energy, owners and operators of timber tracts, forestry services, producers of pulp and paper and owners of plantations. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
14 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL NATURAL RESOURCES FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID DIRECTLY FROM INSTITUTIONAL SERVICE INSTITUTIONAL YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed)(7) 0.77% 0.77% 0.77% 0.77% 0.77% 0.77% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(8) 0.36% 0.35% 0.35% 0.58% 0.35% 0.35% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES(9) 1.38% 2.12% 2.12% 1.85% 1.12% 1.12% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base management fee depending on the assets in the Fund, and (2) upward or downward by up to 0.10% depending on the Fund's performance relative to its benchmark, the GS Natural Resources Index. Therefore, the management fee stated in the table above reflects, to the extent applicable, adjustments based on the Fund's assets and the Fund's performance relative to its benchmark as of October 31, 2006. Depending on the performance of the Fund, the management fee at the Fund's current asset level could range from 0.60% at its lowest to 0.80% at its highest. For more information, including a chart that shows the range of the minimum to maximum performance-based fees at all breakpoint levels, see Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.01%, 0.23%, and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written agreement limiting operating expenses to 1.20% for all share classes at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses (After Waivers/ Reimbursements)" could increase to 1.70% for Class A, 1.95% for Class R and 1.45% for Institutional Service Class shares of the Fund before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
GARTMORE SECTOR SERIES | 15
SECTION 1 GARTMORE GLOBAL NATURAL RESOURCES FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 707 $ 987 $ 1,287 $ 2,137
--------------------------------------------------------------------------------
Class B shares 715 964 1,339 2,175
--------------------------------------------------------------------------------
Class C shares 315 664 1,139 2,452
--------------------------------------------------------------------------------
Class R shares 188 582 1,001 2,169
--------------------------------------------------------------------------------
Institutional Service Class shares 114 356 617 1,363
--------------------------------------------------------------------------------
Institutional Class shares 114 356 617 1,363
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 215 $ 664 $ 1,139 $ 2,175
--------------------------------------------------------------------------------
Class C shares 215 664 1,139 2,452
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
16 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by U.S. and foreign companies (including those located in EMERGING MARKET COUNTRIES) with business operations in or related to technology or communications. A company that is eligible for investment by the Fund typically derives at least 50% of its revenues, net income or assets from the technology or communications sectors. The Fund is nondiversified, and may invest a significant portion of its assets in the securities of a single issuer or a small number of issuers. The Fund also concentrates at least 25% of its net assets in at least one or more of the following industry groups:
o technology or communications hardware and equipment;
o information technology;
o software;
o technology or communications consulting services;
o consumer electronics;
o defense technology and
o broadcasting.
In analyzing specific companies for possible investment, the Fund's portfolio manager ordinarily looks for several of the following characteristics:
o above-average per share earnings growth;
o high return on invested capital;
o a healthy balance sheet;
o sound financial and accounting policies and overall financial strength;
o strong competitive advantages;
o effective research, product development and marketing;
o development of new technologies;
o efficient service and strong management;
o pricing flexibility and
o general operating characteristics that enable the company to compete successfully.
The Fund may invest in technology and communications companies of any size, including established LARGE-CAP COMPANIES that are expected to grow with the market and SMALL-CAP and MID-CAP COMPANIES that may offer strong prospects for future growth.
The portfolio manager considers selling a security when any of these factors changes materially or when an alternative investment provides more attractive risk/return characteristics.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities. These risks may be enhanced in emerging market countries.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Goldman Sachs Technology Composite Index(R) (GSTI(R)), or other funds with similar investment objectives and strategies.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small-and mid-cap companies may be more volatile and less liquid than larger company stocks.
NONDIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
CONCENTRATION RISK - investing 25% or more of the Fund's net assets in a select group of companies in technology and communications industries could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of securities and industries.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE SECTOR SERIES | 17
SECTION 1 GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ---------------------------------------------------- -41.94% -43.57% 51.20% 3.97% -0.51% 11.09% |
BEST QUARTER: 24.50% - 2ND QTR. OF 2003
WORST QUARTER: -41.28 - 1ST QTR. OF 2001
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax returns depend on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
(JUNE 30,
1 YEAR 5 YEARS 2000)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 4.66% -1.57% -11.80%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 4.50% -1.60% -12.22%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions and
Sales of Shares 3.07% -1.34% -9.57%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 5.20% -1.46% -11.63%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2, 3) 9.12% -1.05% -11.53%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 10.91% -0.77% -11.43%
--------------------------------------------------------------------------------
Institutional Service Class
shares - Before Taxes 12.65% 0.06% -10.56%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) 11.62% -0.07% -10.65%
--------------------------------------------------------------------------------
Goldman Sachs Technology
Composite Index (GSTI)(5) 8.96% 1.05% 8.14%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class C shares (3/1/01) and Class R shares (12/30/03) are based on the previous performance of Class B shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class C shares and Class R shares would have produced because all classes invest in the same portfolio of securities. Returns for these classes have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Class have not been adjusted to reflect its lower expenses.
5 The GSTI is an unmanaged, modified, market capitalization-weighted index that measures the performance of companies in the technology sector. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
18 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
--------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
--------------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee (as a percentage
of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
--------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed)(7) 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%
--------------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees (paid
from Fund assets to cover the cost of sales,
promotions and other distribution activities,
as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
--------------------------------------------------------------------------------------------------------------------------------
Other Expenses(8) 0.85% 0.82% 0.82% 1.02% 1.02% 0.82%
--------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.00% 2.72% 2.72% 2.42% 1.92% 1.72%
--------------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense Reimbursement 0.34% 0.34% 0.34% 0.34% 0.34% 0.34%
--------------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES
(AFTER WAIVERS/REIMBURSEMENTS)(9) 1.66% 2.38% 2.38% 2.08% 1.58% 1.38%
--------------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base
management fee depending on the assets in the Fund, and (2) upward or
downward by up to 0.10% depending on the Fund's performance relative
to its benchmark, the GS Technology Composite Index. Therefore, the
management fee stated in the table above reflects, to the extent
applicable, adjustments based on the Fund's assets and the Fund's
performance relative to its benchmark as of October 31, 2006. Depending on
the performance of the Fund, the management fee at the Fund's current
asset level could range from 0.78% at its lowest to 0.98% at its highest.
For more information, including a chart that shows the range of the
minimum to maximum performance-based fees at all breakpoint levels, see
Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.03%, 0.20%, and 0.20%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written agreement limiting operating expenses to 1.38% for all share classes at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.88% for Class A, 2.13% for Class R and 1.63% for Institutional Service Class shares of the Fund before the Adviser would be required to further limit the Fund's expenses.
GARTMORE SECTOR SERIES | 19
SECTION 1 GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 734 $ 1,135 $ 1,561 $ 2,743
--------------------------------------------------------------------------------
Class B shares 741 1,112 1,610 2,772
--------------------------------------------------------------------------------
Class C shares 341 812 1,410 3,026
--------------------------------------------------------------------------------
Class R shares 211 722 1,260 2,731
--------------------------------------------------------------------------------
Institutional Service Class shares 161 570 1,005 2,216
--------------------------------------------------------------------------------
Institutional Class shares 140 509 902 2,002
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 241 $ 812 $ 1,410 $ 2,772
--------------------------------------------------------------------------------
Class C shares 241 812 1,410 3,026
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
20 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL UTILITIES FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital growth.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by U.S. and foreign companies (including those located in EMERGING MARKET COUNTRIES) with business operations in or related to utilities. Although utility companies traditionally have paid above-average dividends, the Fund instead will employ a GROWTH STYLE in selecting investments.
A company that is eligible for investment by the Fund typically derives at least 50% of its revenues, net income or assets from the utilities sector. The Fund is nondiversified, and may invest a significant portion of its assets in the securities of a single issuer or a small number of issuers. The Fund also concentrates at least 25% of its net assets in at least one or more of the following industry groups within this sector:
o energy sources;
o utility maintenance services;
o providers of utility infrastructure;
o cable television;
o radio;
o telecommunications services;
o transportation services and
o water and sanitary services.
The portfolio manager aims to provide strong performance by investing in companies that the portfolio manager believes
o have the potential to deliver unexpected earnings and
o whose prospects for earnings have been underestimated by the market.
Just as importantly, the portfolio manager attempts to avoid companies whose earnings are likely to fall short of expectations.
The portfolio manager assesses the valuation and growth rates both of a particular company and of its utility sector. The portfolio manager conducts proprietary research in order to form an independent perspective that provides a basis for valuing stocks. By comparing the portfolio manager's own valuations of individual companies to those of the market, the portfolio manager pinpoints companies whose prospects appear different from the market's consensus.
The Fund may invest in utility companies of any size, including established LARGE-CAP COMPANIES that are expected to grow with the market and SMALL-CAP and MID-CAP COMPANIES that may offer strong prospects for future growth. The Fund also may use derivatives either as a substitute for taking a position in an underlying asset, to increase returns or as part of a hedging strategy.
The portfolio manager typically sells a security if it no longer offers potential for unexpected earnings growth. The portfolio manager specifically monitors:
o earnings revisions and surprises;
o stock price performance and
o any information indicating a change in the industry or franchise assessment of a company.
The Adviser has chosen Gartmore Global Partners as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Growth stocks as a group may be out of favor and underperform the overall equity market for a long period of time, while the market concentrates on "value" stocks.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities. These risks are enhanced in emerging market countries.
NON-DIVERSIFIED FUND RISK - because the Fund may hold larger positions in fewer securities than other funds, a single security's increase or decrease in value may have a greater impact on the Fund's value and total return.
CONCENTRATION RISK - investing 25% or more of the Fund's net assets in a select group of companies in utilities and utility-related industries could subject the Fund to greater risk of loss and could be considerably more volatile than a broad-based market index or other mutual funds that are diversified across a greater number of securities and industries.
DERIVATIVES RISK - the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
GARTMORE SECTOR SERIES | 21
SECTION 1 GARTMORE GLOBAL UTILITIES FUND SUMMARY AND PERFORMANCE (CONT.)
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Fund's benchmark indices, or other funds with similar investment objectives and strategies.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small-and mid-cap companies may be more volatile and less liquid than larger company stocks.
If the value of the Fund's investments goes down, you may lose money.
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2002 2003 2004 2005 2006 ------------------------------------------ -25.19% 25.57% 29.73% 6.45% 36.60% |
BEST QUARTER: 18.65% - 2ND QTR. OF 2003
WORST QUARTER: -19.30% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
(DEC. 18,
1 YEAR 5 YEARS 2001)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 28.73% 10.81% 10.75%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 27.43% 9.15% 9.11%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions and
Sales of Shares 19.74% 8.50% 8.45%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 30.71% 11.06% 11.11%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2) 34.76% 11.33% 11.25%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 36.07% 11.65% 11.57%
--------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 36.98% 12.42% 12.35%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(4) 36.98% 12.42% 12.35%
--------------------------------------------------------------------------------
MSCI World Telecommunications
Services Index(5) 32.87% 5.10% 5.10%
--------------------------------------------------------------------------------
MSCI World Utilities Index(5) 36.93% 17.19% 17.19%
--------------------------------------------------------------------------------
Global Utilities Composite Index(5) 34.65% 10.18% 10.17%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
3 Returns before the first offering of Class R shares (12/30/03) are based on the previous performance of Class B shares. Excluding the effect of any fee waivers or reimbursements, this performance is substantially similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. Returns for this class have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for the Institutional Class have not been adjusted to reflect its lower expenses.
5 The Morgan Stanley Capital International (MSCI) World Telecommunications Services Index(SM) is an unmanaged index that is based on developed-market country indexes and is generally representative of the stocks in the global utilities sector. The MSCI World Utilities Index(SM) is an unmanaged index that is based on developed-market country indexes and is generally representative of the stocks in the utilities sector, such as electric, gas, multi-utilities, and unregulated power and water. The Global Utilities Composite Index is a combination of 60% MSCI World Telecommunications Services Index and 40% MSCI World Utilities Index. Neither Index pays sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of each Index would be lower. Individuals cannot invest directly in an index.
22 | GARTMORE SECTOR SERIES
SECTION 1 GARTMORE GLOBAL UTILITIES FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
SHAREHOLDER FEES (PAID CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES INSTITUTIONAL SERVICE INSTITUTIONAL DIRECTLY FROM CLASS SHARES CLASS SHARES YOUR INVESTMENT)(1) ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed)(7) 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(8) 0.80% 0.80% 0.80% 1.00% 0.80% 0.80% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 1.80% 2.55% 2.55% 2.25% 1.55% 1.55% ------------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver/Expense Reimbursement(9) 0.35% 0.35% 0.35% 0.35% 0.35% 0.35% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 1.45% 2.20% 2.20% 1.90% 1.20% 1.20% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base
management fee depending on the assets in the Fund, and (2) upward or
downward by up to 0.10% depending on the Fund's performance relative to
its benchmark, the Global Utilities Composite Index. Therefore, the
management fee stated in the table above reflects, to the extent
applicable, adjustments based on the Fund's assets and the Fund's
performance relative to its benchmark as of October 31, 2006. Depending on
the performance of the Fund, the management fee at the Fund's current
asset level could range from 0.60% at its lowest to 0.80% at its highest.
For more information, including a chart that shows the range of the
minimum to maximum performance-based fees at all breakpoint levels, see
Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.00%, 0.25%, and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written agreement limiting operating expenses to 1.20% for all share classes at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.70% for Class A, 1.95% for Class R and 1.45% for Institutional Service Class shares of the Fund before the Adviser would be required to further limit the Fund's expenses.
GARTMORE SECTOR SERIES | 23
SECTION 1 GARTMORE GLOBAL UTILITIES FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 714 $ 1,077 $ 1,463 $ 2,542
--------------------------------------------------------------------------------
Class B shares 723 1,060 1,524 2,589
--------------------------------------------------------------------------------
Class C shares 323 760 1,324 2,859
--------------------------------------------------------------------------------
Class R shares 193 670 1,173 2,558
--------------------------------------------------------------------------------
Institutional Service Class shares 122 455 812 1,816
--------------------------------------------------------------------------------
Institutional Class shares 122 455 812 1,816
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 223 $ 760 $ 1,324 $ 2,589
--------------------------------------------------------------------------------
Class C shares 223 760 1,324 2,859
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
24 | GARTMORE SECTOR SERIES
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - Each of the Funds could lose value if the individual stocks in which it has invested and/or the overall stock markets on which the stocks trade decline in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large-cap stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
FOREIGN SECURITIES RISK - Each of the Funds may invest in foreign securities, which may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities, the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
REIT RISK - the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds, and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
DEPOSITARY RECEIPTS - The Funds may invest in securities of foreign issuers in the form of depositary receipts, such as American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which typically are issued by local financial institutions and evidence ownership of the underlying securities.
Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Depositary receipts may or may not be jointly sponsored by the underlying issuer. The issuers of unsponsored depositary receipts are not obligated to disclose information that is considered material in the United States. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Certain depositary receipts are not listed on an exchange and therefore may be considered to be illiquid securities.
WARRANTS - securities that give the holder the right to buy common stock at a specified price for a specified period of time. Warrants are considered speculative and have no value if they are not exercised before their expiration date.
PREFERRED STOCK - a class of stock that often pays dividends at a specified rate and has preference over common stock in dividend payments and liquidation of assets. Preferred stock may be convertible into common stock.
CONVERTIBLE SECURITIES - generally debt securities or preferred stocks that may be converted into common stock. Convertibles typically pay current income as either interest (debt security convertibles) or dividends (preferred stocks). A convertible's value usually reflects both the stream of current income payments and the value of the underlying common stock. The market value of a convertible performs like that of a regular debt security, that is, if market interest rates rise, the value of a convertible usually falls. Since it is convertible into common stock, the convertible also has the same types of market and issuer risk as the underlying common stock.
GARTMORE SECTOR SERIES | 25
SECTION 2 FUND DETAILS (CONT.)
DERIVATIVES - a derivative is a contract with its value based on the performance of an underlying financial asset, index or other measure. For example, an option is a derivative because its value changes in relation to the performance of an underlying stock. The value of an option on a futures contract varies with the value of the underlying futures contract, which in turn varies with the value of the underlying commodity or security. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset to which the derivative is linked changes in unexpected ways. Some risks of investing in derivatives include:
o the other party to the derivatives contract may fail to fulfill its obligations;
o their use may reduce liquidity and make the Fund harder to value, especially in declining markets;
o the Fund may suffer disproportionately heavy losses relative to the amount invested and
o changes in the value of derivatives may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
EQUITY INTERESTS IN FOREIGN INVESTMENT FUNDS OR TRUSTS - In some countries, it is common practice for U.S. mutual funds to gain market exposure by purchasing shares of investment companies that in turn invest in the securities of these countries.
COMMODITY-LINKED DERIVATIVES - allow investors exposure to the investment returns of real assets that trade in the commodities markets without investing directly in physical commodities. Real assets, as opposed to stocks or bonds, are assets that have tangible properties, such as oil, livestock and agricultural or metal products. The value of a commodity-linked derivative is typically based upon the price movements of its linked commodities, a commodity index, or some other readily measurable economic variable dependent upon changes in the value of commodities or the commodities markets.
PORTFOLIO TURNOVER - The Funds may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
SECURITIES LENDING - The Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances, these events could trigger adverse tax consequences to a Fund.
TEMPORARY INVESTMENTS - Each of the Funds generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances, and interest-bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
26 | GARTMORE SECTOR SERIES
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER AND SUBADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Funds' respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
Gartmore Global Partners ("GGP"), 8 Fenchurch Place, London, England, United Kingdom, is the subadviser for the Gartmore Global Utilities Fund and manages that Fund's assets in accordance with the investment objective and strategies. GGP makes investment decisions and executes them by placing purchase and sell orders for securities. Effective September 29, 2006, GGP ceased to be an affiliate of either the Adviser or NWD Investments.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory and subadvisory agreements for the Funds will be available in the Funds' semiannual report to shareholders, which covers the period from November 1, 2006 to April 30, 2007.
MANAGEMENT FEES
Each Fund pays the Adviser a base management fee, which is based on a Fund's average daily net assets. With respect to the Gartmore Global Utilities Fund, which is subadvised by GGP, the Adviser pays GGP a subadvisory fee from the management fee the Adviser collects from the Fund. The management fee for each of the Funds may increase or decrease depending on how each Fund performs relative to its respective benchmark. The Funds' benchmarks for determining these performance-based fees are:
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund MSCI World Financials Index
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund GS Healthcare Index
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund GS Natural Resources Index
--------------------------------------------------------------------------------
Gartmore Global Technology and GS Technology Composite Index
Communications Fund
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 60% MSCI World Telecommunications
Services Index/ 40% MSCI World
Utilities Index
--------------------------------------------------------------------------------
|
PERFORMANCE-BASED FEES
Each Fund pays a performance-based fee to the Adviser. This performance-based fee can vary depending on the Fund's performance relative to its respective benchmark. This fee is intended to either reward or penalize the Adviser for outperforming or underperforming, respectively, each Fund's benchmark.
The calculation of this fee is done in two separate steps. First, the Fund pays a base fee (to be paid at the end of each quarter), as adjusted for any applicable breakpoints as described in the chart shown below under the heading "Management and Subadvisory Fees" (the "Base Fee Breakpoints"). The base fee rate results in an annual fee, calculated and accrued daily. The fee rate is applied to each such Fund's average net assets over that quarter. Second, a performance adjustment percentage is applied to the Fund's average net assets over the 12-month rolling performance period. The performance adjustment amount is then added to (or subtracted from, as applicable) the base fee to arrive at the Fund's total advisory fee for the most recently completed quarterly sub-period and that total fee is paid at the end of that most recently completed quarter.
The performance fee calculation applies to all of a Fund's share classes equally, based on the performance of the Class A shares during the performance period. The table below shows the performance adjustment rate applicable to each Fund's base fee (as such base fee may be adjusted by Base Fee Breakpoints, as described under "Management and Subadvisory Fees").
-------------------------------------------------------------------------------- OUTPERFORMANCE OR UNDER CHANGE IN FEES -------------------------------------------------------------------------------- +/- 1 percentage point +/- 0.02% -------------------------------------------------------------------------------- +/- 2 percentage points +/- 0.04% -------------------------------------------------------------------------------- +/- 3 percentage points +/- 0.06% -------------------------------------------------------------------------------- +/- 4 percentage points +/- 0.08% -------------------------------------------------------------------------------- +/- 5 percentage points +/- 0.10% -------------------------------------------------------------------------------- |
These performance-adjusted advisory fees are paid quarterly. The SAI contains more detailed information about any possible performance adjustments.
Under these performance fee arrangements, the Adviser can receive a performance fee increase even if a Fund experiences negative performance that still exceeds its benchmark by more than the relevant percentage amount shown above.
GARTMORE SECTOR SERIES | 27
SECTION 3 FUND MANAGEMENT (CONT.)
The table below shows the base management fees, as well as the maximum and minimum fees, if applicable and actual management fees paid during the fiscal year ended October 31, 2006. With respect to the Gartmore Global Utilities Fund, the table also shows the base subadvisory fee, as well as the maximum and minimum subadvisory fee, if applicable, and actual subadvisory fees paid during the same period. It does not take into account any applicable waivers.
MINIMUM FEE BASE FEE MAXIMUM FEE
NET ASSETS MANAGEMENT SUBADVISORY MANAGEMENT SUBADVISORY MANAGEMENT SUBADVISORY
---------------------------------------------------------------------------------------------------------------------------
GARTMORE GLOBAL FINANCIAL SERVICES FUND
---------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.80% n/a 0.90% n/a 1.00% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.75% n/a 0.85% n/a 0.95% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.70% n/a 0.80% n/a 0.90% n/a
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
GARTMORE GLOBAL HEALTH SCIENCES FUND
---------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.80% n/a 0.90% n/a 1.00% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.75% n/a 0.85% n/a 0.95% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.70% n/a 0.80% n/a 0.90% n/a
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
GARTMORE GLOBAL NATURAL RESOURCES FUND
---------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.60% n/a 0.70% n/a 0.80% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.55% n/a 0.65% n/a 0.75% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.50% n/a 0.60% n/a 0.70% n/a
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
GARTMORE GLOBAL TECHNOLOGY AND
COMMUNICATIONS FUND
---------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.78% n/a 0.88% n/a 0.98% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.73% n/a 0.83% n/a 0.93% n/a
---------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.68% n/a 0.78% n/a 0.88% n/a
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
GARTMORE GLOBAL UTILITIES FUND
---------------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.60% 0.25% 0.70% 0.35% 0.80% 0.45%
---------------------------------------------------------------------------------------------------------------------------
On assets of $500 million up to $2 billion 0.55% 0.225% 0.65% 0.325% 0.75% 0.425%
---------------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.50% 0.20% 0.60% 0.30% 0.70% 0.40%
---------------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------
MANAGEMENT FEE SUBADVISORY FEE
--------------------------------------------------------------------------------------
Gartmore Global Financial Services Fund*,** 0.87% n/a
--------------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 0.85% n/a
--------------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund** 0.77% n/a
--------------------------------------------------------------------------------------
Gartmore Global Technology and Communications Fund 0.90% n/a
--------------------------------------------------------------------------------------
Gartmore Global Utilities Fund* 0.75% 0.35%
--------------------------------------------------------------------------------------
|
* NWD Management & Research Trust (formerly known as Gartmore Global Asset Management Trust) was the investment adviser to the Gartmore Global Financial Services Fund and the Gartmore Global Utilities Fund until September 29, 2006 when it transferred all of its investment advisory responsibilities to the Adviser, its wholly-owned subsidiary.
** As of September 29, 2006, the subadvisory agreement with GGP with respect to the Gartmore Global Financial Services Fund and the Gartmore Global Natural Resources Fund was terminated and the Adviser assumed responsibility for the management of the two Funds. Thus, the subadvisory fees shown above for the two Funds reflect the fees paid during the prior fiscal year up to September 29, 2006.
28 | GARTMORE SECTOR SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
PORTFOLIO MANAGEMENT
GARTMORE GLOBAL FINANCIAL SERVICES FUND
Douglas Burtnick, CFA, portfolio manager, and Stuart Quint, CFA, equity research analyst, are responsible for the day-to-day management of the Fund and the selection of the Fund's investments, and have managed the Fund since November 3, 2003.
Douglas Burtnick joined the Adviser in May 2002 from Brown Brothers Harriman & Company where he served as a risk manager in the private client group and portfolio manager from 2000 to 2002. He currently also manages or co-manages the Gartmore Global Health Sciences Fund, the Gartmore Growth Fund, the Gartmore U.S. Growth Leaders Fund, the Gartmore U.S. Growth Leaders Long-Short Fund, the Gartmore GVIT Global Financial Services Fund, the Gartmore GVIT Global Health Sciences Fund, the Gartmore GVIT Growth Fund and the Gartmore GVIT U.S. Growth Leaders Fund.
Stuart Quint provides fundamental research coverage for the financial sector, including banks, savings and loans, brokers, insurance companies and other specialized financial companies. Prior to joining the Adviser in September 2003, Mr. Quint was with the Libra Fund, a Swedish hedge fund based in New York, from August 2002 to September 2003 where he had a specialized focus in financial and energy stocks. He has spent thirteen years in investment management, and prior to joining the Libra Fund held senior level equity positions with Friends Ivory Sime, Montgomery Asset Management and Sanford Bernstein. Mr. Quint holds a B.S. degree in Economics from the Wharton School at the University of Pennsylvania (cum laude) along with a B.A. in Russian Civilization, and is also a CFA.
GARTMORE GLOBAL HEALTH SCIENCES FUND
Douglas Burtnick, CFA, portfolio manager, is responsible for the day-to-day management of the Fund and the selection of the Fund's investments.
See Mr. Burtnick's description under "Portfolio Management--Gartmore Global Financial Services Fund."
GARTMORE GLOBAL NATURAL RESOURCES FUND
William Gerlach, CFA, senior portfolio manager, and Jason Kotik, CFA, assistant portfolio manager and senior equity research analyst, are responsible for the day-to-day management of the Fund and the selection of the Fund's investments, and have managed the Fund since January 7, 2004.
William Gerlach joined the Adviser in December 2003. From 1991 until Mr. Gerlach joined the Adviser, he held numerous positions at Morgan Stanley Investment Management - Miller Anderson & Sherrard, LLP. He currently also manages or co-manages the Gartmore Small Cap Fund, the Gartmore Small Cap Leaders Fund, the Gartmore Small Cap Value Fund and a portion of each of the GVIT Small Company Fund and the GVIT Small Cap Value Fund.
Mr. Kotik joined the Adviser in November 2000 and is a member of the Large Cap Growth and Multi-Cap team. He provides fundamental research coverage for the industrials, materials and utilities sectors. Mr. Kotik is a graduate of the University of Delaware, and has earned an MBA from Johns Hopkins University.
GARTMORE SECTOR SERIES | 29
SECTION 3 FUND MANAGEMENT (CONT.)
GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND
Jayne Stevlingson, CFA, is the Fund's portfolio manager and is responsible for the day-to-day management of the Fund and the selection of the Fund's investments. Ms. Stevlingson joined the Adviser in August 2005 as a Senior Portfolio Manager and became the portfolio manager of the Fund in April 2006. Prior to joining the Adviser, she was a principal responsible for managing a hedge fund of small- and mid-cap equities at Altura Asset Management, LLC from November 2004 to July 2005. From 1999 to 2003, Ms. Stevlingson was a vice president and senior portfolio manager at Oppenheimer Funds, Inc. Ms. Stevlingson currently also manages the Gartmore Small Cap Growth Opportunities Fund and the Gartmore GVIT Technology and Communications Fund.
GARTMORE GLOBAL UTILITIES FUND
Ben Walker, CFA, senior portfolio manager, Global Equities, is responsible for the day-to-day management of the Fund and the selection of the Fund's investments.
Mr. Walker joined GGP in 1997. He has obtained the IMC and is a CFA Charterholder. Mr. Walker graduated from St. Edmund Hall, Oxford University, with an Honours degree in Politics, Philosophy and Economics in 1993. He currently also manages or co-manages the Gartmore International Growth Fund, the Gartmore GVIT Global Utilities Fund and the Gartmore GVIT International Growth Fund.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Gartmore Global Utilities Fund is subadvised by GGP, while each of the Gartmore Global Financial Services Fund, Gartmore Global Health Sciences Fund, Gartmore Global Natural Resources Fund and Gartmore Global Technology and Communications Fund is managed directly by the Adviser. If a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows these Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
30 | GARTMORE SECTOR SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class shares and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
--------------------------------------------------------------------------------
CLASS A SHARES
Front-end sales charge up to 5.75% A front-end sales charge means that a
portion of your initial investment goes
toward the sales charge and is not
invested.
Contingent deferred sales charge Reduction and waivers of sales charges may
(CDSC)(1) be available.
Annual service and/or 12b-1 fee of Total annual operating expenses are lower
0.25% than Class B and Class C expenses,
Administrative services fee which means higher dividends and/or
up to 0.25% net asset value ("NAV") per share.
No conversion feature.
No maximum investment amount.
--------------------------------------------------------------------------------
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full
investment immediately goes toward
buying shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines 1% in most years to zero
after six years.
Annual service and/or 12b-1 fee of Total annual operating expenses are higher
1.00% than Class A expenses, which means
No administrative services lower dividends and/or NAV per share.
fee
Automatic conversion to Class A shares
after seven years, which means lower
annual expenses in the future.
Maximum investment amount of $100,000.
Larger investments may be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full
investment immediately goes toward
buying shares.
No reduction of CDSC, but waivers may be
available.
The CDSC declines to zero after one year.
Annual service and/or 12b-1 fee of Total annual operating expenses are higher
1.00% No administrative services than Class A expenses, which means
fee lower dividends and/or NAV per share.
No conversion feature.
Maximum investment amount of
$1,000,000(2). Larger investments may
be rejected.
--------------------------------------------------------------------------------
|
1 Unless you are eligible to purchase Class A shares without a sales charge, a CDSC of up to 1.00% may be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
GARTMORE SECTOR SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
------------------------------------------------------------------------
$1 million or more None None None*
------------------------------------------------------------------------
|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
32 | GARTMORE SECTOR SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 1.00% applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason; or
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN SALES OF CLASS A SHARES
-------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE If sold within 18 months 18 months 18 months -------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% -------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Funds is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
GARTMORE SECTOR SERIES | 33
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
--------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEAR OR MORE
--------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
--------------------------------------------------------------------------------
|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The Funds offer Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
o the appropriate level and type of fee to compensate the intermediary. An intermediary may receive different compensation depending on which class is chosen.
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial services firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
34 | GARTMORE SECTOR SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Funds;
o retirement plans for which no third-party administrator receives compensation from the Funds;
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Institutional Class and Institutional Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
--------------------------------------------------------------------------------
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
|
ADMINISTRATIVE SERVICES FEES
Class A, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by the Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
GARTMORE SECTOR SERIES | 35
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to www.nwdfunds.com 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus Ohio 43219.
BY FAX 614-428-3278.
36 | GARTMORE SECTOR SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B AND CLASS C SHARES
All transaction orders must be received by the Funds' agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
------------------------------------------------------------------------------------------------------------------------------
HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS.
THE OFFERING OF SHARES AT ANY TIME. ** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
------------------------------------------------------------------------------------------------------------------------------
THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, intermediaries who are authorized to accept purchase,
exchange and redemption orders for the Funds. Your exchange and redemption orders for the Funds. Your
transaction is processed at the NAV next calculated after the transaction is processed at the NAV next calculated after the
Funds' agent or an authorized intermediary receives your Funds' agent or an authorized intermediary receives your
order in proper form. order in proper form.
------------------------------------------------------------------------------------------------------------------------------
BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. mailing or faxing a letter to Gartmore Funds. The letter must
dollars and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT include your account number(s) and the name(s) of the Fund(s)
CASH, STARTER CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, you wish to exchange from and to. The letter must be signed
CREDIT CARD CHECKS OR MONEY ORDERS. by all account owners. We reserve the right to request
original documents for any faxed requests.
------------------------------------------------------------------------------------------------------------------------------
BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The Funds unless you decline this option on your application. The Funds
follow procedures to confirm that telephone instructions are follow procedures to confirm that telephone instructions are
genuine and will not be liable for any loss, injury, damage genuine and will not be liable for any loss, injury, damage
or expense that results from executing such instructions. The or expense that results from executing such instructions. The
Funds may revoke telephone privileges at any time, without Funds may revoke telephone privileges at any time, without
notice to shareholders. notice to shareholders. For redemptions, shareholders who own
shares in an IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed to the
address of record.
The Funds may record telephone instructions to redeem shares
and may request redemption instructions in writing, signed by
all shareholders on the account.
------------------------------------------------------------------------------------------------------------------------------
ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line website. However, the Funds may discontinue on-line
transactions of Fund shares at any time. transactions of Fund shares at any time.
------------------------------------------------------------------------------------------------------------------------------
BY BANK WIRE. You may have your bank transmit funds by BY BANK WIRE. The Funds can wire the proceeds of your
federal funds wire to the Funds' custodian bank. (The redemption directly to your account at a commercial bank. A
authorization will be in effect unless you give the Funds voided check must be attached to your application. (The
written notice of its termination.) authorization will be in effect unless you give the Funds
written notice of its termination.)
o if you choose this method to open a new account, you o your proceeds typically will be wired to your bank on
must call our toll-free number before you wire your the next business day after your order has been
investment and arrange to fax your completed processed.
application.
o Gartmore Funds deducts a $20 service fee from the
o your bank may charge a fee to wire funds. redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in order to o your financial institution may also charge a fee for
receive the current day's NAV. receiving the wire.
o funds sent outside the U.S. may be subject to higher
fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
------------------------------------------------------------------------------------------------------------------------------
BY AUTOMATED CLEARING HOUSE (ACH). You can fund your Gartmore BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds
Funds' account with proceeds from your bank via ACH on the can be sent to your bank via ACH on the second business day
second business day after your purchase order has been after your order has been processed. A voided check must be
processed. A voided check must be attached to your attached to your application. Money sent through ACH should
application. Money sent through ACH typically reaches reach your bank in two business days. There is no fee for
Gartmore Funds from your bank in two business days. There is this service. (The authorization will be in effect unless you
no fee for this service. (The authorization will be in effect give the Funds written notice of its termination.)
unless you give the Funds written notice of its termination.)
ACH IS NOT AN OPTION FOR EXCHANGES.
------------------------------------------------------------------------------------------------------------------------------
RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans plan administrator regarding transactions. Retirement plans
or their administrators wishing to conduct transactions or their administrators wishing to conduct transactions
should call our toll-free number. Eligible entities or should call our toll-free number. Eligible entities or
individuals wishing to conduct transactions in Institutional individuals wishing to conduct transactions in Institutional
Service Class or Institutional Class shares should call our Service Class or Institutional Class shares should call our
toll-free number. toll-free number.
|
GARTMORE SECTOR SERIES | 37
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
38 | GARTMORE SECTOR SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS B AND CLASS C SHARES To open an account $ 2,000 (per Fund) To open an IRA account $ 1,000 (per Fund) Additional investments $ 100 (per Fund) To start an Automatic Asset Accumulation Plan $ 1,000 (per Fund) Additional investments (Automatic Asset Accumulation Plan) $ 50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $ 50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
Minimum investment requirements do not apply to certain retirement plans, fee-based programs or omnibus accounts. If you purchase shares through an intermediary, different minimum account requirements may apply. The Distributor reserves the right to waive the investment minimums under certain circumstances.
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
GARTMORE SECTOR SERIES | 39
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund).
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C Shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell or, in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or the Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
40 | GARTMORE SECTOR SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
GARTMORE SECTOR SERIES | 41
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or redemptions and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser, its subadvisers and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares-Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
42 | GARTMORE SECTOR SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70-1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund for less than the minimum holding period listed below:
--------------------------------------------------------------------------------
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and
Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
GARTMORE SECTOR SERIES | 43
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gains distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
44 | GARTMORE SECTOR SERIES
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gains distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
GARTMORE SECTOR SERIES | 45
SECTION 6 GARTMORE GLOBAL FINANCIAL SERVICES FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31 or, if a Fund or a class has not been in operation for five years, for the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.04 (1.12) (1.08)
Year Ended October 31, 2003 $ 8.92 0.07 2.83 2.90
Year Ended October 31, 2004 $ 11.80 0.12 1.77 1.89
Year Ended October 31, 2005 $ 12.49 0.11 1.72 1.83
Year Ended October 31, 2006 $ 13.41 0.16 2.92 3.08
--------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.02) (1.11) (1.13)
Year Ended October 31, 2003 $ 8.87 0.01 2.79 2.80
Year Ended October 31, 2004 $ 11.67 0.02 1.75 1.77
Year Ended October 31, 2005 $ 12.30 0.04 1.68 1.72
Year Ended October 31, 2006 $ 13.17 0.05 2.87 2.92
--------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 10.00 (0.02) (1.11) (1.13)
Year Ended October 31, 2003 $ 8.87 0.01 2.79 2.80
Year Ended October 31, 2004 $ 11.67 0.02 1.75 1.77
Year Ended October 31, 2005 $ 12.30 0.03 1.68 1.71
Year Ended October 31, 2006 $ 13.16 0.06 2.86 2.92
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 11.47 0.04 0.86 0.90
Year Ended October 31, 2005 $ 12.31 0.12 1.67 1.79
Year Ended October 31, 2006 $ 13.19 0.14 2.86 3.00
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL REDEMPTION VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) - - - - $ 8.92 (10.78%)(e)
Year Ended October 31, 2003 (0.02) - (0.02) - $ 11.80 32.59%
Year Ended October 31, 2004 (0.09) (1.11) (1.20) - $ 12.49 17.01%
Year Ended October 31, 2005 (0.11) (0.80) (0.91) - $ 13.41 14.91%
Year Ended October 31, 2006 (0.20) (0.62) (0.82) 0.01 $ 15.68 23.87%
---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) - - - - $ 8.87 (11.30%)(e)
Year Ended October 31, 2003 - - - - $ 11.67 31.60%
Year Ended October 31, 2004 (0.03) (1.11) (1.14) - $ 12.30 16.15%
Year Ended October 31, 2005 (0.05) (0.80) (0.85) - $ 13.17 14.02%
Year Ended October 31, 2006 (0.11) (0.62) (0.73) 0.01 $ 15.37 22.98%
---------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) - - - - $ 8.87 (11.30%)(e)
Year Ended October 31, 2003 - - - - $ 11.67 31.60%
Year Ended October 31, 2004 (0.03) (1.11) (1.14) - $ 12.30 16.16%
Year Ended October 31, 2005 (0.05) (0.80) (0.85) - $ 13.16 13.94%
Year Ended October 31, 2006 (0.11) (0.62) (0.73) 0.01 $ 15.36 23.03%
---------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) (0.06) - (0.06) - $ 12.31 7.89%(e)
Year Ended October 31, 2005 (0.11) (0.80) (0.91) - $ 13.19 14.82%
Year Ended October 31, 2006 (0.18) (0.62) (0.80) 0.01 $ 15.40 23.59%
---------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END EXPENSES TO (LOSS) TO MENTS) TO MENTS) TO
OF PERIOD AVERAGE NET AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) $ 675 1.66%(f) 0.47%(f) 3.76%(f) (1.63%)(f) 102.39%
Year Ended October 31, 2003 $ 1,228 1.65% 0.81% 2.78% (0.33%) 256.82%
Year Ended October 31, 2004 $ 2,457 1.65% 1.06% 2.41% 0.31% 129.61%
Year Ended October 31, 2005 $ 4,546 1.66% 1.00% 2.00% 0.66% 213.88%
Year Ended October 31, 2006 $ 21,752 1.52% 1.01% 1.53% 1.01% 195.16%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 672 2.38%(f) (0.25%)(f) 4.51%(f) (2.38%)(f) 102.39%
Year Ended October 31, 2003 $ 906 2.40% 0.08% 3.67% (1.20%) 256.82%
Year Ended October 31, 2004 $ 1,072 2.40% 0.20% 3.14% (0.54%) 129.61%
Year Ended October 31, 2005 $ 1,243 2.40% 0.28% 2.80% (0.12%) 213.88%
Year Ended October 31, 2006 $ 2,993 2.25% 0.33% 2.25% 0.33% 195.16%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 665 2.38%(f) (0.25%)(f) 4.51%(f) (2.38%)(f) 102.39%
Year Ended October 31, 2003 $ 883 2.40% 0.08% 3.68% (1.20%) 256.82%
Year Ended October 31, 2004 $ 1,088 2.40% 0.20% 3.15% (0.55%) 129.61%
Year Ended October 31, 2005 $ 1,590 2.40% 0.30% 2.77% (0.08%) 213.88%
Year Ended October 31, 2006 $ 5,514 2.24% 0.37% 2.24% 0.36% 195.16%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 1 1.98%(f) 0.46%(f) 2.74%(f) (0.30%)(f) 129.61%
Year Ended October 31, 2005 $ 1 1.71% 0.96% 2.27% 0.41% 213.88%
Year Ended October 31, 2006 $ 79 1.78% 1.00% 1.78% 1.00% 195.16%
-----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 18, 2001 (commencement of operations) through October 31, 2002.
(e) Not annualized.
(f) Annualized.
(g) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
46 | GARTMORE SECTOR SERIES
SECTION 6 GARTMORE GLOBAL FINANCIAL SERVICES FUND FINANCIAL HIGHLIGHTS (CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.06 (1.12) (1.06)
Year Ended October 31, 2003 $ 8.94 0.11 2.83 2.94
Year Ended October 31, 2004 $ 11.85 0.15 1.78 1.93
Year Ended October 31, 2005 $ 12.55 0.16 1.72 1.88
Year Ended October 31, 2006 $ 13.48 0.19 2.94 3.13
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 12.22 0.02 0.34 0.36
Year Ended October 31, 2005 $ 12.55 0.12 1.76 1.88
Year Ended October 31, 2006 $ 13.48 0.19 2.94 3.13
---------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
-----------------------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL REDEMPTION VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) - - - - $ 8.94 (10.57%)(e)
Year Ended October 31, 2003 (0.03) - (0.03) - $ 11.85 32.95%
Year Ended October 31, 2004 (0.12) (1.11) (1.23) - $ 12.55 17.25%
Year Ended October 31, 2005 (0.15) (0.80) (0.95) - $ 13.48 15.20%
Year Ended October 31, 2006 (0.23) (0.62) (0.85) 0.01 $ 15.77 24.19%
-----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) (0.03) - (0.03) - $ 12.55 2.96%(e)
Year Ended October 31, 2005 (0.15) (0.80) (0.95) - $ 13.48 15.20%
Year Ended October 31, 2006 (0.23) (0.62) (0.85) 0.01 $ 15.77 24.19%
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END EXPENSES TO (LOSS) TO MENTS) TO MENTS) TO
OF PERIOD AVERAGE NET AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 671 1.40%(f) 0.73%(f) 3.51%(f) (1.38%)(f) 102.39%
Year Ended October 31, 2003 $ 892 1.40% 1.08% 2.68% (0.20%) 256.82%
Year Ended October 31, 2004 $ 1,046 1.40% 1.20% 2.14% 0.46% 129.61%
Year Ended October 31, 2005 $ 1,205 1.40% 1.27% 1.79% 0.88% 213.88%
Year Ended October 31, 2006 $ 1,496 1.27% 1.32% 1.27% 1.31% 195.16%
-----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 674 1.40%(f) 0.53%(f) 2.30%(f) (0.37%)(f) 129.61%
Year Ended October 31, 2005 $ 6,219 1.40% 1.22% 1.62% 1.00% 213.88%
Year Ended October 31, 2006 $ 19,768 1.24% 1.31% 1.25% 1.31% 195.16%
-----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 18, 2001 (commencement of operations) through October 31, 2002.
(e) Not annualized.
(f) Annualized.
(g) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
GARTMORE SECTOR SERIES | 47
SECTION 6 GARTMORE GLOBAL HEALTH SCIENCES FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9.33 (0.06) (0.97) (1.03)
Year Ended October 31, 2003 $ 8.30 (0.05) 1.99 1.94
Year Ended October 31, 2004 $ 10.24 (0.06) 0.70 0.64
Year Ended October 31, 2005 $ 10.04 (0.06) 1.71 1.65
Year Ended October 31, 2006 $ 11.63 (0.03) 0.65 0.62
---------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 9.29 (0.15) (0.93) (1.08)
Year Ended October 31, 2003 $ 8.21 (0.13) 1.98 1.85
Year Ended October 31, 2004 $ 10.06 (0.13) 0.69 0.56
Year Ended October 31, 2005 $ 9.78 (0.13) 1.67 1.54
Year Ended October 31, 2006 $ 11.26 (0.09) 0.61 0.52
---------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 7.92 (0.01) 0.30 0.29
Year Ended October 31, 2003 $ 8.21 (0.12) 1.98 1.86
Year Ended October 31, 2004 $ 10.07 (0.04) 0.59 0.55
Year Ended October 31, 2005 $ 9.78 (0.12) 1.66 1.54
Year Ended October 31, 2006 $ 11.26 (0.10) 0.63 0.53
---------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 10.04 (0.09) (0.14) (0.23)
Year Ended October 31, 2005 $ 9.81 (0.06) 1.68 1.62
Year Ended October 31, 2006 $ 11.37 (0.03) 0.63 0.60
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 9.36 (0.04) (0.97) (1.01)
Year Ended October 31, 2003 $ 8.35 (0.04) 2.01 1.97
Year Ended October 31, 2004 $ 10.32 (0.06) 0.71 0.65
Year Ended October 31, 2005 $ 10.13 (0.05) 1.74 1.69
Year Ended October 31, 2006 $ 11.76 (0.04) 0.69 0.65
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 10.92 (0.01) (0.77) (0.78)
Year Ended October 31, 2005 $ 10.14 (0.03) 1.74 1.71
Year Ended October 31, 2006 $ 11.79 0.01 0.66 0.67
---------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------
NET NET ASSET
REALIZED TOTAL VALUE, END TOTAL
GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 - - $ 8.30 (11.04%)
Year Ended October 31, 2003 - - $ 10.24 23.37%
Year Ended October 31, 2004 (0.84) (0.84) $ 10.04 6.26%
Year Ended October 31, 2005 (0.06) (0.06) $ 11.63 16.47%
Year Ended October 31, 2006 (1.10) (1.10) $ 11.15 5.52%
--------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 - - $ 8.21 (11.63%)
Year Ended October 31, 2003 - - $ 10.06 22.53%
Year Ended October 31, 2004 (0.84) (0.84) $ 9.78 5.52%
Year Ended October 31, 2005 (0.06) (0.06) $ 11.26 15.78%
Year Ended October 31, 2006 (1.10) (1.10) $ 10.68 4.75%
--------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) - - $ 8.21 3.66%(e)
Year Ended October 31, 2003 - - $ 10.07 22.66%
Year Ended October 31, 2004 (0.84) (0.84) $ 9.78 5.52%
Year Ended October 31, 2005 (0.06) (0.06) $ 11.26 15.66%
Year Ended October 31, 2006 (1.10) (1.10) $ 10.69 4.84%
---------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) - - $ 9.81 (2.29%)(e)
Year Ended October 31, 2005 (0.06) (0.06) $ 11.37 16.55%
Year Ended October 31, 2006 (1.10) (1.10) $ 10.87 5.46%
--------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 - - $ 8.35 (10.79%)
Year Ended October 31, 2003 - - $ 10.32 23.59%
Year Ended October 31, 2004 (0.84) (0.84) $ 10.13 6.30%
Year Ended October 31, 2005 (0.06) (0.06) $ 11.76 16.72%
Year Ended October 31, 2006 (1.10) (1.10) $ 11.31 5.73%
--------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) - - $ 10.14 (7.14%)(e)
Year Ended October 31, 2005 (0.06) (0.06) $ 11.79 16.90%
Year Ended October 31, 2006 (1.10) (1.10) $ 11.36 5.90%
--------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES TO (LOSS) TO MENTS) TO MENTS) TO
PERIOD AVERAGE NET AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,538 1.60% (0.99%) 3.10% (2.49%) 893.80%
Year Ended October 31, 2003 $ 4,087 1.57% (0.75%) 2.29% (1.47%) 570.16%
Year Ended October 31, 2004 $ 6,144 1.59% (0.67%) 1.90% (0.98%) 388.52%
Year Ended October 31, 2005 $ 11,131 1.64% (0.66%) 1.72% (0.74%) 401.37%
Year Ended October 31, 2006 $ 10,636 1.57% (0.24%) 1.58% (0.25%) 268.38%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 730 2.28% (1.71%) 4.00% (3.43%) 893.80%
Year Ended October 31, 2003 $ 899 2.25% (1.41%) 3.06% (2.22%) 570.16%
Year Ended October 31, 2004 $ 1,076 2.25% (1.32%) 2.56% (1.63%) 388.52%
Year Ended October 31, 2005 $ 1,302 2.29% (1.27%) 2.39% (1.37%) 401.37%
Year Ended October 31, 2006 $ 1,458 2.23% (0.90%) 2.24% (0.90%) 268.38%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 58 2.25%(f) (1.69%)(f) 2.80%(f) (2.24%)(f) 893.80%
Year Ended October 31, 2003 $ 130 2.25% (1.45%) 2.96% (2.16%) 570.16%
Year Ended October 31, 2004 $ 2,092 2.25% (1.44%) 2.57% (1.76%) 388.52%
Year Ended October 31, 2005 $ 3,899 2.30% (1.30%) 2.37% (1.37%) 401.37%
Year Ended October 31, 2006 $ 3,788 2.23% (0.90%) 2.24% (0.91%) 268.38%
-----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 1 1.88%(f) (1.03%)(f) 2.22%(f) (1.37%)(f) 388.52%
Year Ended October 31, 2005 $ 1 1.60% (0.59%) 1.67% (0.65%) 401.37%
Year Ended October 31, 2006 $ 1 1.63% (0.29%) 1.64% (0.30%) 268.38%
-----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 1,403 1.27% (0.66%) 2.85% (2.24%) 893.80%
Year Ended October 31, 2003 $ 3,746 1.42% (0.61%) 2.12% (1.31%) 570.16%
Year Ended October 31, 2004 $ 4,979 1.46% (0.54%) 1.76% (0.84%) 388.52%
Year Ended October 31, 2005 $ 5,828 1.50% (0.47%) 1.59% (0.57%) 401.37%
Year Ended October 31, 2006 $ 1,130 1.39% (0.15%) 1.40% (0.16%) 268.38%
-----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 404 1.25%(f) (0.25%)(f) 1.54%(f) (0.54%)(f) 388.52%
Year Ended October 31, 2005 $ 3,776 1.29% (0.35%) 1.34% (0.41%) 401.37%
Year Ended October 31, 2006 $ 12,468 1.23% 0.10% 1.24% 0.10% 268.38%
-----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 23, 2002 (commencement of operations) through October 31, 2002.
(e) Not annualized.
(f) Annualized.
(g) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
48 | GARTMORE SECTOR SERIES
SECTION 6 GARTMORE GLOBAL NATURAL RESOURCES FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 1.25 1.25
Year Ended October 31, 2005 $ 11.23 -(g) 7.14 7.14
Year Ended October 31, 2006 $ 17.97 (0.02) 3.90 3.88
--------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.03) 1.24 1.21
Year Ended October 31, 2005 $ 11.21 (0.04) 7.04 7.00
Year Ended October 31, 2006 $ 17.82 (0.14) 3.83 3.69
--------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.02) 1.23 1.21
Year Ended October 31, 2005 $ 11.21 (0.04) 7.05 7.01
Year Ended October 31, 2006 $ 17.83 (0.16) 3.85 3.69
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.02) 1.24 1.22
Year Ended October 31, 2005 $ 11.22 -(g) 7.08 7.08
Year Ended October 31, 2006 $ 17.91 (0.04) 3.86 3.82
--------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.02 1.23 1.25
Year Ended October 31, 2005 $ 11.23 0.01 7.15 7.16
Year Ended October 31, 2006 $ 17.99 0.03 3.91 3.94
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 1.25 1.26
Year Ended October 31, 2005 $ 11.24 0.03 7.15 7.18
Year Ended October 31, 2006 $ 18.01 0.03 3.91 3.94
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL REDEMPTION VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) (0.02) - (0.02) - $ 11.23 12.58%(e)
Year Ended October 31, 2005 (0.01) (0.40) (0.41) 0.01 $ 17.97 65.51%
Year Ended October 31, 2006 - (1.56) (1.56) 0.02 $ 20.31 22.87%
---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) - - - - $ 11.21 12.10%(e)
Year Ended October 31, 2005 - (0.40) (0.40) 0.01 $ 17.82 64.49%
Year Ended October 31, 2006 - (1.56) (1.56) 0.02 $ 19.97 21.94%
---------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) - - - - $ 11.21 12.20%(e)
Year Ended October 31, 2005 - (0.40) (0.40) 0.01 $ 17.83 64.42%
Year Ended October 31, 2006 - (1.56) (1.56) 0.02 $ 19.98 21.92%
---------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - -(g) - - $ 11.22 12.22%(e)
Year Ended October 31, 2005 - (0.40) (0.40) 0.01 $ 17.91 65.15%
Year Ended October 31, 2006 - (1.56) (1.56) 0.02 $ 20.19 22.59%
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) (0.02) - (0.02) - $ 11.23 12.50%(e)
Year Ended October 31, 2005 (0.01) (0.40) (0.41) 0.01 $ 17.99 65.89%
Year Ended October 31, 2006 - (1.56) (1.56) 0.02 $ 20.39 23.20%
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) (0.02) - (0.02) - $ 11.24 12.60%(e)
Year Ended October 31, 2005 (0.02) (0.40) (0.42) 0.01 $ 18.01 66.02%
Year Ended October 31, 2006 - (1.56) (1.56) 0.02 $ 20.41 23.17%
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 107 1.58%(f) (1.05%)(f) 4.11%(f) (3.59%)(f) 48.29%
Year Ended October 31, 2005 $ 10,915 1.47% (0.13%) 1.59% (0.25%) 313.92%
Year Ended October 31, 2006 $ 20,324 1.38% (0.07%) 1.38% (0.07%) 228.18%
---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 1 2.30%(f) (0.88%)(f) 4.44%(f) (3.02%)(f) 48.29%
Year Ended October 31, 2005 $ 648 2.20% (0.83%) 2.54% (1.18%) 313.92%
Year Ended October 31, 2006 $ 1,862 2.12% (0.84%) 2.13% (0.85%) 228.18%
---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 6 2.30%(f) (1.29%)(f) 4.77%(f) (3.76%)(f) 48.29%
Year Ended October 31, 2005 $ 4,938 2.20% (0.87%) 2.27% (0.94%) 313.92%
Year Ended October 31, 2006 $ 10,302 2.12% (0.81%) 2.12% (0.82%) 228.18%
---------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 1.94%(f) (0.53%)(f) 3.91%(f) (2.51%)(f) 48.29%
Year Ended October 31, 2005 $ 23 1.73% (0.14%) 1.94% (0.36%) 313.92%
Year Ended October 31, 2006 $ 249 1.75% (0.43%) 1.77% (0.45%) 228.18%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 1 1.39%(f) 0.17%(f) 3.56%(f) (2.00%)(f) 48.29%
Year Ended October 31, 2005 $ 170 1.22% 0.03% 0.80% 0.45% 313.92%
Year Ended October 31, 2006 $ 537 1.12% 0.13% 1.13% 0.16% 228.18%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 3,377 1.30%(f) 0.27%(f) 3.32%(f) (1.74%)(f) 48.29%
Year Ended October 31, 2005 $ 8,078 1.23% 0.25% 1.95% (0.48%) 313.92%
Year Ended October 31, 2006 $ 15,731 1.11% 0.16% 1.13% 0.13% 228.18%
---------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(e) Not annualized.
(f) Annualized.
(g) Amount is less than $0.005.
GARTMORE SECTOR SERIES | 49
SECTION 6 GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
----------------------------------------------------------------------------------------
NET
REALIZED AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
----------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 4.02 (0.04) (1.35) (1.39)
Year Ended October 31, 2003 $ 2.63 (0.04) 1.27 1.23
Year Ended October 31, 2004 $ 3.86 (0.06) (0.28) (0.34)
Year Ended October 31, 2005 $ 3.52 (0.03) 0.22 0.19
Year Ended October 31, 2006 $ 3.71 (0.03) 0.53 0.50
----------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 3.97 (0.07) (1.32) (1.39)
Year Ended October 31, 2003 $ 2.58 (0.06) 1.25 1.19
Year Ended October 31, 2004 $ 3.77 (0.08) (0.28) (0.36)
Year Ended October 31, 2005 $ 3.41 (0.05) 0.21 0.16
Year Ended October 31, 2006 $ 3.57 (0.06) 0.51 0.45
----------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 3.99 (0.08) (1.31) (1.39)
Year Ended October 31, 2003 $ 2.60 (0.06) 1.25 1.19
Year Ended October 31, 2004 $ 3.79 (0.06) (0.30) (0.36)
Year Ended October 31, 2005 (i) $ 3.43 (0.05) 0.22 0.17
Year Ended October 31, 2006 $ 3.60 (0.04) 0.49 0.45
----------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 3.70 (0.05) (0.23) (0.28)
Year Ended October 31, 2005 $ 3.42 (0.03) 0.21 0.18
Year Ended October 31, 2006 $ 3.60 (0.05) 0.52 0.47
----------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 4.06 (0.03) (1.37) (1.40)
Year Ended October 31, 2003 $ 2.66 (0.04) 1.30 1.26
Year Ended October 31, 2004 $ 3.92 (0.06) (0.29) (0.35)
Year Ended October 31, 2005 $ 3.57 (0.03) 0.24 0.21
Year Ended October 31, 2006 (i) $ 3.78 (0.46) 1.02 0.56
----------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 3.81 (0.01) (0.22) (0.23)
Year Ended October 31, 2005 $ 3.58 (0.02) 0.23 0.21
Year Ended October 31, 2006 $ 3.79 (0.02) 0.54 0.52
----------------------------------------------------------------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (a)
-----------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 2.63 (34.58%)(f)
Year Ended October 31, 2003 $ 3.86 46.77%
Year Ended October 31, 2004 $ 3.52 (8.81%)
Year Ended October 31, 2005 $ 3.71 5.40%
Year Ended October 31, 2006 $ 4.21 13.48%
-----------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 2.58 (35.01%)(f)
Year Ended October 31, 2003 $ 3.77 46.12%
Year Ended October 31, 2004 $ 3.41 (9.55%)
Year Ended October 31, 2005 $ 3.57 4.69%
Year Ended October 31, 2006 $ 4.02 12.61%
-----------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 2.60 (34.84%)(f)
Year Ended October 31, 2003 $ 3.79 45.77%
Year Ended October 31, 2004 $ 3.43 (9.50%)
Year Ended October 31, 2005 (i) $ 3.60 4.96%
Year Ended October 31, 2006 $ 4.05 12.50%
-----------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 3.42 (7.57%)(d)
Year Ended October 31, 2005 $ 3.60 5.26%
Year Ended October 31, 2006 $ 4.07 13.06%
-----------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 2.66 (34.48%)(f)
Year Ended October 31, 2003 $ 3.92 47.37%
Year Ended October 31, 2004 $ 3.57 (8.93%)
Year Ended October 31, 2005 $ 3.78 5.88%
Year Ended October 31, 2006 (i) $ 4.34 14.81%
-----------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 3.58 (6.04%)(d)
Year Ended October 31, 2005 $ 3.79 5.87%
Year Ended October 31, 2006 $ 4.31 13.72%
-----------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
RATIO
RATIO OF NET RATIO OF OF NET
NET INVESTMENT EXPENSES INVESTMENT
ASSETS AT RATIO OF INCOME (PRIOR TO INCOME (PRIOR TO
END OF EXPENSES (LOSS) TO REIMBURSEMENTS) REIMBURSEMENTS)
PERIOD TO AVERAGE AVERAGE TO AVERAGE NET TO AVERAGE PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) NET ASSETS (b) TURNOVER (c)
------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,514 1.69% (1.37%) 2.56% (2.24%) 944.01%
Year Ended October 31, 2003 $ 3,303 1.69% (1.38%) 2.96% (2.64%) 1136.72%
Year Ended October 31, 2004 $ 2,991 1.71% (1.45%) 2.02% (1.76%) 722.91%
Year Ended October 31, 2005 $ 3,071 1.72% (0.87%) 2.23% (1.38%) 654.64%
Year Ended October 31, 2006 $ 3,797 1.66% (1.01%) 2.03% (1.38%) 368.77%
------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 780 2.38% (2.02%) 3.32% (2.96%) 944.01%
Year Ended October 31, 2003 $ 1,196 2.40% (2.07%) 3.73% (3.40%) 1136.72%
Year Ended October 31, 2004 $ 1,064 2.40% (2.14%) 2.72% (2.46%) 722.91%
Year Ended October 31, 2005 $ 1,038 2.41% (1.55%) 2.93% (2.07%) 654.64%
Year Ended October 31, 2006 $ 1,312 2.36% (1.72%) 2.73% (2.09%) 368.77%
------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 17 2.38% (1.83%) 3.40% (2.85%) 944.01%
Year Ended October 31, 2003 $ 39 2.40% (2.10%) 3.65% (3.35%) 1136.72%
Year Ended October 31, 2004 $ 79 2.40% (2.14%) 2.73% (2.47%) 722.91%
Year Ended October 31, 2005 (i) $ 33 2.41% (1.51%) 3.06% (2.16%) 654.64%
Year Ended October 31, 2006 $ 79 2.33% (1.71%) 2.73% (2.11%) 368.77%
------------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 1 1.99%(e) (1.75%)(e) 2.28%(e) (2.04%)(e) 722.91%
Year Ended October 31, 2005 $ 1 1.83% (1.01%) 2.33% (1.51%) 654.64%
Year Ended October 31, 2006 $ 1 1.97% (1.34%) 2.39% (1.75%) 368.77%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 843 1.41% (1.37%) 2.08% (2.04%) 944.01%
Year Ended October 31, 2003 $ 5,006 1.58% (1.29%) 2.65% (2.36%) 1136.72%
Year Ended October 31, 2004 $ 4,358 1.62% (1.36%) 1.92% (1.67%) 722.91%
Year Ended October 31, 2005 $ 3,513 1.62% (0.74%) 2.17% (1.30%) 654.64%
Year Ended October 31, 2006 (i) $ 1 1.58% (0.83%) 1.81% (1.06%) 368.77%
------------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 231 1.40%(e) (1.05%)(e) 1.92%(e) (1.57%)(e) 722.91%
Year Ended October 31, 2005 $ 2,344 1.40% (0.77%) 1.68% (1.05%) 654.64%
Year Ended October 31, 2006 $ 7,708 1.33% (0.73%) 1.74% (1.14%) 368.77%
------------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) Not annualized.
(e) Annualized.
(f) The total returns shown include losses realized on the disposal of investments that were reimbursed by the adviser, which otherwise would have reduced total returns by 0.54%, 0.60%, 0.89%, and 0.38% for Class A, Class B, Class C and Institutional Service Class shares, respectively.
(g) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(i) Net investment income (loss) is based on average shares outstanding during the period.
50 | GARTMORE SECTOR SERIES
SECTION 6 GARTMORE GLOBAL UTILITIES FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.11 (2.85) (2.74)
Year Ended October 31, 2003 $ 7.20 0.07 1.06 1.13
Year Ended October 31, 2004 $ 8.28 0.09 2.54 2.63
Year Ended October 31, 2005 $ 10.87 0.19 1.69 1.88
Year Ended October 31, 2006 $ 12.30 0.24 2.59 2.83
---------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.05 (2.84) (2.79)
Year Ended October 31, 2003 $ 7.18 0.02 1.05 1.07
Year Ended October 31, 2004 $ 8.22 0.04 2.50 2.54
Year Ended October 31, 2005 $ 10.75 0.09 1.68 1.77
Year Ended October 31, 2006 $ 12.15 0.16 2.54 2.70
---------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.05 (2.84) (2.79)
Year Ended October 31, 2003 $ 7.18 0.02 1.05 1.07
Year Ended October 31, 2004 $ 8.22 0.03 2.51 2.54
Year Ended October 31, 2005 (i) $ 10.74 0.15 1.62 1.77
Year Ended October 31, 2006 $ 12.15 0.13 2.58 2.71
---------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 9.14 0.08 1.58 1.66
Year Ended October 31, 2005 $ 10.78 0.20 1.66 1.86
Year Ended October 31, 2006 $ 12.20 0.24 2.51 2.75
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 10.00 0.13 (2.85) (2.72)
Year Ended October 31, 2003 $ 7.21 0.09 1.06 1.15
Year Ended October 31, 2004 $ 8.30 0.13 2.53 2.66
Year Ended October 31, 2005 $ 10.91 0.23 1.69 1.92
Year Ended October 31, 2006 $ 12.35 0.30 2.57 2.87
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 9.75 0.03 1.15 1.18
Year Ended October 31, 2005 $ 10.91 0.17 1.75 1.92
Year Ended October 31, 2006 $ 12.35 0.27 2.60 2.87
---------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
----------------------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL REDEMPTION VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
----------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) (0.06) - (0.06) - $ 7.20 (27.46%)(e)
Year Ended October 31, 2003 (0.05) - (0.05) - $ 8.28 15.80%
Year Ended October 31, 2004 (0.04) - (0.04) - $ 10.87 31.81%
Year Ended October 31, 2005 (0.22) (0.25) (0.47) 0.02 $ 12.30 17.73%
Year Ended October 31, 2006 (0.20) (1.94) (2.14) - $ 12.99 27.56%
----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) (0.03) - (0.03) - $ 7.18 (27.93%)(e)
Year Ended October 31, 2003 (0.03) - (0.03) - $ 8.22 14.92%
Year Ended October 31, 2004 (0.01) - (0.01) - $ 10.75 30.86%
Year Ended October 31, 2005 (0.14) (0.25) (0.39) 0.02 $ 12.15 16.93%
Year Ended October 31, 2006 (0.12) (1.94) (2.06) - $ 12.79 26.57%
----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) (0.03) - (0.03) - $ 7.18 (27.93%)(e)
Year Ended October 31, 2003 (0.03) - (0.03) - $ 8.22 14.92%
Year Ended October 31, 2004 (0.02) - (0.02) - $ 10.74 30.90%
Year Ended October 31, 2005 (i) (0.13) (0.25) (0.38) 0.02 $ 12.15 16.88%
Year Ended October 31, 2006 (0.13) (1.94) (2.07) - $ 12.79 26.60%
----------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) (0.02) - (0.02) - $ 10.78 18.23%(e)
Year Ended October 31, 2005 (0.21) (0.25) (0.46) 0.02 $ 12.20 17.61%
Year Ended October 31, 2006 (0.18) (1.94) (2.12) - $ 12.83 27.11%
----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) (0.07) - (0.07) - $ 7.21 (27.27%)(e)
Year Ended October 31, 2003 (0.06) - (0.06) - $ 8.30 16.10%
Year Ended October 31, 2004 (0.05) - (0.05) - $ 10.91 32.13%
Year Ended October 31, 2005 (0.25) (0.25) (0.50) 0.02 $ 12.35 18.05%
Year Ended October 31, 2006 (0.23) (1.94) (2.17) - $ 13.05 27.88%
----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) (0.02) - (0.02) - $ 10.91 12.15%(e)
Year Ended October 31, 2005 (0.25) (0.25) (0.50) 0.02 $ 12.35 18.05%
Year Ended October 31, 2006 (0.23) (1.94) (2.17) - $ 13.05 27.88%
----------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO
(000s) NET ASSETS ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2002 (d) $ 547 1.46%(f) 1.46%(f) 3.96%(f) (1.04%)(f) 146.88%
Year Ended October 31, 2003 $ 734 1.45% 0.96% 3.06% (0.65%) 112.34%
Year Ended October 31, 2004 $ 1,190 1.45% 1.14% 2.70% (0.10%) 391.22%
Year Ended October 31, 2005 $ 2,377 1.47% 1.70% 2.02% 1.15% 295.27%
Year Ended October 31, 2006 $ 5,185 1.45% 2.32% 1.80% 1.97% 83.30%
---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d) $ 544 2.18%(f) 0.75%(f) 4.71%(f) (1.78%)(f) 146.88%
Year Ended October 31, 2003 $ 625 2.20% 0.25% 3.89% (1.44%) 112.34%
Year Ended October 31, 2004 $ 885 2.20% 0.41% 3.46% (0.84%) 391.22%
Year Ended October 31, 2005 $ 1,202 2.20% 0.96% 2.76% 0.40% 295.27%
Year Ended October 31, 2006 $ 1,875 2.18% 1.62% 2.54% 1.27% 83.30%
---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2002 (d) $ 541 2.18%(f) 0.75%(f) 4.71%(f) (1.78%)(f) 146.88%
Year Ended October 31, 2003 $ 623 2.20% 0.25% 3.89% (1.44%) 112.34%
Year Ended October 31, 2004 $ 3,556 2.20% 0.43% 3.33% (0.70%) 391.22%
Year Ended October 31, 2005 (i) $ 2,435 2.20% 1.25% 2.81% 0.63% 295.27%
Year Ended October 31, 2006 $ 5,512 2.17% 1.30% 2.49% 0.98% 83.30%
---------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (g) $ 1 1.78%(f) 0.99%(f) 3.14%(f) (0.35%)(f) 391.22%
Year Ended October 31, 2005 $ 1 1.51% 1.64% 2.31% 0.84% 295.27%
Year Ended October 31, 2006 $ 2 1.78% 2.08% 2.18% 1.68% 83.30%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2002 (d) $ 545 1.20%(f) 1.72%(f) 3.71%(f) (0.79%)(f) 146.88%
Year Ended October 31, 2003 $ 633 1.20% 1.25% 2.89% (0.44%) 112.34%
Year Ended October 31, 2004 $ 837 1.20% 1.41% 2.46% 0.15% 391.22%
Year Ended October 31, 2005 $ 987 1.20% 1.97% 1.78% 1.39% 295.27%
Year Ended October 31, 2006 $ 1,264 1.20% 2.68% 1.55% 2.33% 83.30%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (h) $ 250 1.20%(f) 1.02%(f) 2.19%(f) 0.03%(f) 391.22%
Year Ended October 31, 2005 $ 1,896 1.20% 1.85% 1.67% 1.38% 295.27%
Year Ended October 31, 2006 $ 6,254 1.20% 2.81% 1.50% 2.49% 83.30%
---------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratio would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 18, 2001 (commencement of operations) through October 31, 2002.
(e) Not annualized.
(f) Annualized.
(g) For the period from December 30, 2003 (commencement of operations) through April 30, 2004.
(h) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(i) Net investment income (loss) is based on average shares outstanding during the period.
GARTMORE SECTOR SERIES | 51
This page intentionally left blank.
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. -
9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for
closing share prices. Also, visit the Gartmore Funds' website at
www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov;
o by electronic request to publicinfo@sec.gov;
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-SEC 2/07
INDEX SERIES
Gartmore Bond Index Fund
Gartmore International Index Fund
Gartmore Mid Cap Market Index Fund
Gartmore S&P 500 Index Fund
Gartmore Small Cap Index Fund
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore Bond Index Fund Class A GBIAX -------------------------------------------------------------------------------- Gartmore Bond Index Fund Class B GBIBX -------------------------------------------------------------------------------- Gartmore Bond Index Fund Class C GBICX -------------------------------------------------------------------------------- Gartmore Bond Index Fund Class R n/a -------------------------------------------------------------------------------- Gartmore Bond Index Fund Institutional Class GBXIX -------------------------------------------------------------------------------- Gartmore International Index Fund Class A GIIAX -------------------------------------------------------------------------------- Gartmore International Index Fund Class B GIIBX -------------------------------------------------------------------------------- Gartmore International Index Fund Class C GIICX -------------------------------------------------------------------------------- Gartmore International Index Fund Class R n/a -------------------------------------------------------------------------------- Gartmore International Index Fund Institutional Class GIXIX -------------------------------------------------------------------------------- Gartmore Mid Cap Market Index Fund Class A GMXAX -------------------------------------------------------------------------------- Gartmore Mid Cap Market Index Fund Class B GMCBX -------------------------------------------------------------------------------- Gartmore Mid Cap Market Index Fund Class C GMCCX -------------------------------------------------------------------------------- Gartmore Mid Cap Market Index Fund Class R n/a -------------------------------------------------------------------------------- Gartmore Mid Cap Market Index Fund Institutional Class GMXIX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Class A GRMAX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Class B GRMBX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Class C GRMCX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Class R GRMRX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Institutional Class GRMIX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Local Fund GRMLX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Service Class GRMSX -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund Institutional Service Class GRISX -------------------------------------------------------------------------------- Gartmore Small Cap Index Fund Class A GMRAX -------------------------------------------------------------------------------- Gartmore Small Cap Index Fund Class B GMRBX -------------------------------------------------------------------------------- Gartmore Small Cap Index Fund Class C GMRCX -------------------------------------------------------------------------------- Gartmore Small Cap Index Fund Class R n/a -------------------------------------------------------------------------------- Gartmore Small Cap Index Fund Institutional Class GMRIX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND
PERFORMANCE
Gartmore Bond Index Fund
Gartmore International Index Fund
Gartmore Mid Cap Market Index Fund
Gartmore S&P 500 Index Fund
Gartmore Small Cap Index Fund
26 SECTION 2: FUND DETAILS
Additional Information about Investments,
Investment Techniques and Risks
30 SECTION 3: FUND MANAGEMENT
Investment Adviser
Subadviser
Portfolio Management
Multi-Manager Structure
32 SECTION 4: INVESTING WITH
GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
45 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other
Tax-Deferred Accounts
Backup Withholding
47 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE INDEX SERIES | 1
INDEX Series
INTRODUCTION TO THE INDEX SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT FIVE FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
Gartmore Bond Index Fund
Gartmore International Index Fund
Gartmore Mid Cap Market Index Fund
Gartmore S&P 500 Index Fund
Gartmore Small Cap Index Fund
THE FUNDS ARE PRIMARILY INTENDED:
o to seek to match the performance of a specific market index before the deduction of Fund expenses.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
o Gartmore Bond Index Fund, Gartmore International Index Fund, Gartmore Mid Cap Market Index Fund and Gartmore Small Cap Index Fund offer four share classes -- Class A, Class B, Class C and Institutional Class.
o Gartmore S&P 500 Index Fund offers eight share classes -- Class A, Class B, Class C, Class R, Institutional Class, Local Fund, Service Class and Institutional Service Class. All other classes of the above Funds that are in this Prospectus have not yet commenced operations.
An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
A NOTE ABOUT THE INDEX SERIES
The Funds in the Index Series each employ a "passive management" or "indexing" investment approach, seeking to invest in a portfolio of securities substantially the same as the securities tracked in a benchmark index. Each Fund's performance is expected to approximately match the performance of its applicable index prior to the deduction of Fund expenses. Each Fund may change its target index without shareholder approval if Gartmore Mutual Fund Capital Trust (the "Adviser") believes that a different index better represents the performance of the applicable market segment.
Each Fund employs a "multi-manager" structure, which means that the Adviser, as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE INDEX SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
BONDS - debt obligations issued by corporations, governments and other issuers.
COMMON STOCK - securities representing shares of ownership of a corporation.
DERIVATIVE - a contract whose value is based on the performance of an underlying financial asset, index or economic measure.
DURATION - related in part to the remaining time until maturity of a bond, duration is a measure of how much the price of a bond would change compared to a change in market interest rates. A bond's value drops when interest rates rise, and vice versa. Bonds with longer durations have higher risk and volatility.
EQUITY SECURITIES - securities including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign funds or trusts and depositary receipts, that represent an ownership interest in the issuer.
FIXED-INCOME SECURITIES - securities, including bonds and other debt securities, that represent an obligation by the issuer to pay a specified rate of interest or dividend at specified times.
INVESTMENT GRADE - the four highest rating categories of nationally recognized statistical rating organizations, including Moody's, Standard & Poor's and Fitch.
LARGE-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Standard & Poor's (S&P) 500(R) Index, ranging from $1.4 billion to $446.9 billion as of December 31, 2006.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
MARKET-WEIGHTED INDEX - an index in which the weighting of each security is based on the issuing company's market capitalization. Changes in the price of a company with a large capitalization affect the level of the index more than do changes in the price of a company with a smaller capitalization.
MATURITY - the time at which the principal amount of a bond is scheduled to be returned to investors.
MID-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the S&P MidCap 400 Index, ranging from $500 million to $10.6 billion as of December 31, 2006.
MORTGAGE-BACKED SECURITIES - fixed-income securities that give the holder the right to receive a portion of principal and/or interest payments made on a pool of residential or commercial mortgage loans, which in some cases are guaranteed by government agencies.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
U.S. GOVERNMENT AGENCY SECURITIES - debt securities issued and/or guaranteed as to principal and interest by U.S. government agencies, U.S. government-sponsored enterprises and U.S. government instrumentalities that are not direct obligations of the United States. Such securities may not be supported by the full faith and credit of the United States.
U.S. GOVERNMENT SECURITIES - debt securities issued and/or guaranteed as to principal and interest by the U.S. government that are supported by the full faith and credit of the United States.
GARTMORE INDEX SERIES | 3
SECTION 1 GARTMORE BOND INDEX FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to match the performance of the Lehman Brothers U.S. Aggregate Index ("Lehman Aggregate Index") as closely as possible before the deduction of Fund expenses.
PRINCIPAL STRATEGIES
The Fund employs a "passive" management approach, investing in a portfolio of assets whose performance is expected to match approximately the performance of the Lehman Aggregate Index before the deduction of Fund expenses. Under normal circumstances, the Fund invests at least 80% of the value of its net assets in a statistically selected sampling of BONDS and other FIXED-INCOME SECURITIES that are included in or correlated with the Lehman Aggregate Index, as well as DERIVATIVES linked to that index. The Lehman Aggregate Index is composed primarily of U.S. dollar-denominated INVESTMENT GRADE bonds of different types, including:
o U.S. GOVERNMENT SECURITIES;
o U.S. GOVERNMENT AGENCY SECURITIES;
o corporate bonds issued by U.S. and foreign companies;
o MORTGAGE-BACKED SECURITIES;
o securities of foreign governments and their agencies and
o securities of supranational entities, such as the World Bank.
The Fund does not necessarily invest in all of the bonds in the index, or in the same weightings. The Fund may invest in bonds not included in the Lehman Aggregate Index which are selected to reflect characteristics such as MATURITY, DURATION, or credit quality similar to the Lehman Aggregate Index. As a result, the Fund may have different levels of interest rate, credit or prepayment risks from the levels of risks in the index.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
INTEREST RATE RISK - generally, when interest rates go up, the value of fixed-income securities goes down.
CREDIT RISK - a bond issuer may be unable to pay the interest or principal when due. This risk is more pronounced with high-yield bonds and other lower rated securities.
PREPAYMENT RISK - certain bonds will be paid off by the issuer more quickly than anticipated. If this happens, the Fund may be required to invest the proceeds in securities with lower yields.
EXTENSION RISK - when interest rates rise, certain bond obligations will be paid in full by the issuer more slowly than anticipated, causing the value of the securities to fall.
MORTGAGE-BACKED SECURITIES RISK - these securities are subject to all of the above-referenced risks including interest rate risk, credit risk, prepayment risk and extension risk. Because of prepayment risk and extension risk, mortgage-backed securities react differently to changes in interest rates than do other fixed-income securities and small changes in interest rates can quickly reduce the value of those securities.
INDEX FUND RISK - the Fund does not use defensive strategies or attempt to reduce its exposure to poor performing securities. Correlation between the Fund's performance and that of the index may be negatively affected by the Fund's expenses, changes in the composition of the index, and the timing of purchase and redemption of Fund shares. Further, the Fund has operating expenses, while the index does not. Therefore, the Fund will tend to underperform the index to some degree over time.
DERIVATIVES RISK - the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
PORTFOLIO TURNOVER - The Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE BOND INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad- based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
The Fund commenced operations on December 29, 1999 and until October 15, 2001 invested all of its assets in the Master Aggregate Bond Series ("Series"), which was also managed by the Fund's subadviser. The returns shown for 1998 and through December 28, 1999 include the performance of the Series. The returns for the period prior to commencement of operations are not adjusted for the Fund's higher expenses and, therefore, the Fund's actual returns would have been lower. The returns reflect the Fund's actual Class A expenses from December 29, 1999 through December 31, 2006. However, on October 15, 2001, the Fund's assets were redeemed from the Series and since that time have been managed by the Fund.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1998 1999 2000 2001 2002 2003 2004 2005 2006 ---------------------------------------------------------------------------- 9.00% -0.96% 11.60% 7.20% 8.50% 3.20% 3.73% 1.87% 3.75% |
BEST QUARTER: 5.31% - 4TH QTR OF 2000
WORST QUARTER: -2.63% -2ND QTR OF 2004
GARTMORE INDEX SERIES | 5
SECTION 1 GARTMORE BOND INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer- sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
1 YEAR 5 YEARS (DEC. 29, 1999)
--------------------------------------------------------------------------------
Class A shares - Before Taxes(2) -2.21% 3.13% 5.28%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions(2) -3.64% 1.69% 4.03%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares(2) -1.46% 1.81% 3.80%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(3) -1.94% 3.35% 5.57%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(4) 2.14% 3.72% 5.58%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(5) 3.75% 4.36% 5.92%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(2) 4.16% 4.76% 6.24%
--------------------------------------------------------------------------------
Lehman Aggregate Index(6) 4.33% 5.06% 6.46%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 These returns until the creation of Class A and Institutional Class shares (12/29/99) include the previous performance of the Series, which began operations on April 3, 1997. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class A and Institutional Class shares would have produced because these classes of the Fund's shares invested in the same portfolio of securities as the Series. The performance for these classes has been restated to reflect differences in sales charges (where applicable), but does not reflect the differing levels of other fees applicable to such classes; if these fees were reflected, the performance for Class A and Institutional Class shares would have been lower.
3 These returns until the creation of Class B shares (10/12/01) include the previous performance based on the Series for the period through December 28, 1999 and the Fund's Class A shares for the period from December 29, 1999 to October 11, 2001. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class B shares would have produced because Class B shares invest in the same portfolio of securities as Class A shares. The performance for Class B shares has been restated to reflect differences in sales charges (where applicable), but does not reflect the differing levels of other fees (primarily Rule 12b-1 and/or administrative services fees) applicable to such classes; if these fees were reflected, the performance for Class B shares would have been lower.
4 These returns until the creation of Class C shares (3/29/06) include the previous performance based on the Series for the period through December 28, 1999, the Fund's Class A shares from December 29, 1999 until October 11, 2001 and the Fund's Class B shares from October 12, 2001 to March 28, 2006. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class C shares would have produced because all classes invest in the same portfolio of securities. The performance for Class C shares has been restated to reflect differences in sales charges (where applicable), but does not reflect any differing levels of other fees (primarily Rule 12b-1 and/or administrative services fees) applicable to such class.
5 Class R shares have not commenced operations. These returns include the previous performance based on the Series for the period through December 28, 1999, and the Fund's Class A shares from December 29, 1999 until December 31, 2006. The performance of Class R shares has been restated to reflect differences in sales charges, but does not reflect the differing levels of other fees applicable to such class; if these fees were reflected, the performance for Class R shares would have been lower.
6 The Lehman Aggregate Index is an unmanaged market value-weighted index comprised of investment-grade, fixed-rate debt issues (including government, corporate, asset-backed and mortgage-backed securities with maturities of one year or more) that is generally representative of the U.S. bond market as a whole. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
6 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE BOND INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
--------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS SHARES --------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None --------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None 5.00%(3) 1.00%(4) None None --------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(5) 2.00% 2.00% 2.00% 2.00% 2.00% --------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) --------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.22% 0.22% 0.22% 0.22% 0.22% --------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None --------------------------------------------------------------------------------------------------------------------------- Other Expenses(6) 0.27% 0.13% 0.13% 0.33% 0.13% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.74% 1.35% 1.35% 1.05% 0.35% --------------------------------------------------------------------------------------------------------------------------- Amount of Fee Waiver/ Expense Reimbursement(7) 0.03% 0.03% 0.03% 0.03% 0.03% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 0.71% 1.32% 1.32% 1.02% 0.32% --------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may also charge you a transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class-Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class-Class B Shares.
4 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
5 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
6 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A and Class R shares. For the year ended October 31, 2006, administrative services fees for Class A shares were 0.14%. Administrative services fees for Class R shares are estimated to be 0.20% for the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 0.32% for all share classes until at least February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided however, that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 0.82% for Class A shares and 1.07% for Class R shares before the Adviser would be required to further limit the Fund's expenses.
GARTMORE INDEX SERIES | 7
SECTION 1 GARTMORE BOND INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
EXAMPLE
This Example is intended to help you to 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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares $643 $795 $960 $1,438
--------------------------------------------------------------------------------
Class B shares 634 725 936 1,376
--------------------------------------------------------------------------------
Class C shares 234 425 736 1,621
--------------------------------------------------------------------------------
Class R shares 104 331 576 1,280
--------------------------------------------------------------------------------
Institutional Class shares 33 109 193 440
--------------------------------------------------------------------------------
|
You would pay the following expenses on the same investment if you did not sell your shares*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $134 $425 $736 $1,376
--------------------------------------------------------------------------------
Class C shares 134 425 736 1,621
--------------------------------------------------------------------------------
|
* Expenses paid on the same investment in Class A,Class R and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
8 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE INTERNATIONAL INDEX FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to match the performance of the Morgan Stanley Capital International Europe, Australasia and Far East Index ("MSCI EAFE(R) Index") as closely as possible before the deduction of Fund expenses.
PRINCIPAL STRATEGIES
The Fund employs a "passive" management approach, investing in a portfolio of assets whose performance is expected to match approximately the performance of the MSCI EAFE Index before the deduction of Fund expenses. Under normal circumstances, the Fund invests at least 80% of the value of its net assets in a statistically selected sampling of EQUITY SECURITIES of companies included in the MSCI EAFE Index and in DERIVATIVE instruments linked to the MSCI EAFE Index, primarily futures contracts.
The MSCI EAFE Index is a MARKET-WEIGHTED INDEX composed of COMMON STOCKS of companies from various industrial sectors whose primary trading markets are located outside the United States. Companies included in the MSCI EAFE Index are selected from among the larger-capitalization companies in these markets. The weighting of the MSCI EAFE Index is based on the relative MARKET CAPITALIZATION of each of the countries in the MSCI EAFE Index.
The Fund does not necessarily invest in all of the securities in the MSCI EAFE Index, or in the same weightings. The Fund's portfolio manager chooses investments so that the market capitalizations, industry weightings and other fundamental characteristics of the securities chosen are similar to the MSCI EAFE Index as a whole.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
INDEX FUND RISK - the Fund does not use defensive strategies or attempt to reduce its exposure to poor performing securities. Correlation between the Fund's performance and that of the index may be negatively affected by the Fund's expenses, changes in the composition of the index, and the timing of purchase and redemption of Fund shares. Further, the Fund has operating expenses, while the index does not. Therefore, the Fund will tend to underperform the index to some degree over time.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values, or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE INDEX SERIES | 9
SECTION 1 GARTMORE INTERNATIONAL INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2000 2001 2002 2003 2004 2005 2006 ------------------------------------------------------------ -13.70% -22.50% -17.70% 37.00% 19.14% 13.52% 25.63% |
BEST QUARTER: 18.94% -2ND QTR OF 2003
WORST QUARTER: -21.10% - 3RD QTR OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
1 YEAR 5 YEARS (DEC. 29, 1999)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 18.44% 12.56% 2.76%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 17.20% 11.81% 2.18%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sales of Shares 12.71% 10.65% 2.08%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 19.95% 12.95% 2.93%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2) 24.09% 12.91% 2.75%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(3) 25.63% 13.89% 3.63%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes 26.16% 14.29% 4.02%
--------------------------------------------------------------------------------
MSCI EAFE Index(4) 26.86% 15.43% 4.81%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 These returns until the creation of Class C shares (2/14/05) include the previous performance of the Fund's Class B shares. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class C shares would have produced because both classes invest in the same portfolio of securities. The performance for Class C shares has been restated to reflect differences in sales charges (where applicable), but does not reflect the differing level of fees applicable to Class C shares.
3 Class R shares have not commenced operations. These returns are based on the performance of the Fund's Class A shares. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. The performance of Class R shares has been restated to reflect differences in sales charges, but does not reflect the higher level of other fees applicable to such class; if these fees were reflected, the performance for Class R shares would have been lower.
4 The MSCI EAFE Index is an unmanaged free float-adjusted, market capitalization-weighted index that is designed to measure stocks of developed markets outside of the United States and Canada. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
10 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE INTERNATIONAL INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
--------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS SHARES --------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None --------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None 5.00%(3) 1.00%(4) None None --------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(5) 2.00% 2.00% 2.00% 2.00% 2.00% --------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) --------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.27% 0.27% 0.27% 0.27% 0.27% --------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None --------------------------------------------------------------------------------------------------------------------------- Other Expenses(6) 0.28% 0.14% 0.14% 0.34% 0.14% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.80% 1.41% 1.41% 1.11% 0.41% --------------------------------------------------------------------------------------------------------------------------- Amount of Fee Waiver/ Expense Reimbursement(7) 0.04% 0.04% 0.04% 0.04% 0.04% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 0.76% 1.37% 1.37% 1.07% 0.37% --------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may also charge you a transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class-Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class-Class B Shares.
4 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class-Class C Shares.
5 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares-Exchange and
Redemption Fees.
6 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A and Class R shares. For the year ended October 31, 2006, administrative services fees for Class A shares were 0.14%. Administrative services fees for Class R shares are estimated to be 0.20% for the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 0.37% for all share classes until at least February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided however, that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 0.87% for Class A shares and 1.12% for Class R shares before the Adviser would be required to further limit the Fund's expenses.
GARTMORE INDEX SERIES | 11
SECTION 1 GARTMORE INTERNATIONAL INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares $648 $812 $990 $1,504
--------------------------------------------------------------------------------
Class B shares 639 742 967 1,443
--------------------------------------------------------------------------------
Class C shares 239 442 767 1,687
--------------------------------------------------------------------------------
Class R shares 109 349 608 1,348
--------------------------------------------------------------------------------
Institutional Class shares 38 128 226 514
--------------------------------------------------------------------------------
|
You would pay the following expenses on the same investment if you did not sell your shares*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $139 $442 $767 $1,443
--------------------------------------------------------------------------------
Class C shares 139 442 767 1,687
--------------------------------------------------------------------------------
|
* Expenses paid on the same investment in Class A,Class R and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
12 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE MID CAP MARKET INDEX FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to match the performance of the Standard & Poor's MidCap 400(R) Index ("S&P 400 Index") as closely as possible before the deduction of Fund expenses.
PRINCIPAL STRATEGIES
The Fund employs a "passive" management approach, investing in a portfolio of assets whose performance is expected to match approximately the performance of the S&P 400 Index before the deduction of Fund expenses. Under normal circumstances, the Fund invests at least 80% of the value of its net assets in a statistically selected sampling of EQUITY SECURITIES of companies included in the S&P 400 Index and in DERIVATIVE instruments linked to the S&P 400 Index, primarily futures contracts.
The S&P 400 Index is a MARKET-WEIGHTED INDEX composed of approximately 400 COMMON STOCKS of medium-sized U.S. companies in a wide range of businesses chosen by Standard & Poor's based on a number of factors, including industry representation, market value, economic sector and operating/financial condition. As of December 31, 2006, the MARKET CAPITALIZATIONS of companies in the S&P 400 Index ranged from $500 million to $10.6 billion.
The Fund does not necessarily invest in all of the securities in the S&P 400 Index, or in the same weightings. The Fund's portfolio manager chooses investments so that the market capitalizations, industry weightings and other fundamental characteristics of the securities chosen are similar to the S&P 400 Index as a whole.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
INDEX FUND RISK - the Fund does not use defensive strategies or attempt to reduce its exposure to poor performing securities. Correlation between the Fund's performance and that of the index may be negatively affected by the Fund's expenses, changes in the composition of the index, and the timing of purchase and redemption of Fund shares. Further, the Fund has operating expenses, while the index does not. Therefore, the Fund will tend to underperform the index to some degree over time.
MID-CAP RISK - in general, stocks of mid-cap companies may be more volatile and less liquid than larger company stocks.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values, or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE INDEX SERIES | 13
SECTION 1 GARTMORE MID CAP MARKET INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2000 2001 2002 2003 2004 2005 2006 ---------------------------------------------------------- 18.30% -1.80% -15.30% 34.40% 15.58% 11.82% 9.57% |
BEST QUARTER: 17.99% - 4TH QTR OF 2001
WORST QUARTER: -16.81% - 3RD QTR OF 2001
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
1 YEAR 5 YEARS (DEC. 29, 1999)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 3.28% 8.74% 8.55%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions 2.01% 8.08% 7.73%
--------------------------------------------------------------------------------
Class A shares - After Taxes
on Distributions and Sale of Shares 3.12% 7.40% 7.10%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(2) 3.89% 9.09% 8.90%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(2),(3) 7.91% 9.36% 8.89%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(4) 9.57% 10.03% 9.47%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes 10.00% 10.45% 9.95%
--------------------------------------------------------------------------------
S&P 400 Index(5) 10.32% 10.89% 10.08%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 These returns until the creation of Class B shares (5/25/01) include performance based on the Fund's Class A shares. These returns until the creation of Class C shares (10/22/03) include the previous performance of the Fund's Class A shares for the period through May 24, 2001 and the Fund's Class B shares for the period from May 25, 2001 to October 21, 2003. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class B and Class C shares would have produced because all classes invest in the same portfolio of securities. The performance for Class B and Class C has been restated to reflect differences in sales charges (where applicable), but does not reflect the differing levels of other fees (primarily Rule 12b-1 and/or administrative services fees) applicable to such classes; if these fees were reflected, the performance for Class B and Class C shares would have been lower.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 Class R shares have not commenced operations. These returns are based on the performance of the Fund's Class A shares. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. The performance of Class R shares has been restated to reflect differences in sales charges, but does not reflect the higher level of other fees applicable to such class; if these fees were reflected, the performance for Class R shares would have been lower.
5 The S&P 400 Index is an unmanaged index that measures the performance of 400 stocks of medium-sized U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
14 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE MID CAP MARKET INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
--------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS SHARES --------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None --------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None 5.00%(3) 1.00%(4) None None --------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(5) 2.00% 2.00% 2.00% 2.00% 2.00% --------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) --------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.22% 0.22% 0.22% 0.22% 0.22% --------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None --------------------------------------------------------------------------------------------------------------------------- Other Expenses(6) 0.28% 0.14% 0.14% 0.34% 0.14% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.75% 1.36% 1.36% 1.06% 0.36% --------------------------------------------------------------------------------------------------------------------------- Amount of Fee Waiver/ Expense Reimbursement(7) 0.04% 0.04% 0.04% 0.04% 0.04% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 0.71% 1.32% 1.32% 1.02% 0.32% --------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may also charge you a transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
4 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
5 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
6 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A and Class R shares. For the year ended October 31, 2006, administrative services fees for Class A shares were 0.14%. Administrative services fees for Class R shares are estimated to be 0.20% for the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 0.32% for all share classes until at least February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided however, that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 0.82% for Class A shares and 1.07% for Class R shares before the Adviser would be required to further limit the Fund's expenses.
GARTMORE INDEX SERIES | 15
SECTION 1 GARTMORE MID CAP MARKET INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
EXAMPLE
This Example is intended to help you to 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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares $643 $797 $964 $1,448
--------------------------------------------------------------------------------
Class B shares 634 727 941 1,386
--------------------------------------------------------------------------------
Class C shares 234 427 741 1,632
--------------------------------------------------------------------------------
Class R shares 104 333 581 1,291
--------------------------------------------------------------------------------
Institutional Class shares 33 112 198 452
--------------------------------------------------------------------------------
|
You would pay the following expenses on the same investment if you did not sell your shares*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $134 $427 $741 $1,386
--------------------------------------------------------------------------------
Class C shares 134 427 741 1,632
--------------------------------------------------------------------------------
|
* Expenses paid on the same investment in Class A,Class R and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
16 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE S&P 500 INDEX FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to provide investment results that correspond to the price and yield performance of publicly traded common stocks, as represented by the Standard & Poor's 500(R) Index ("S&P 500 Index").
PRINCIPAL STRATEGIES
The Fund employs a "passive" management approach, investing in a portfolio of assets whose performance is expected to match approximately the performance of the S&P 500 Index before the deduction of Fund expenses. Under normal circumstances, the Fund invests at least 80% of the value of its net assets in a statistically selected sampling of EQUITY SECURITIES of companies included in the S&P 500 Index and in DERIVATIVE instruments linked to the S&P 500 Index, primarily futures contracts.
The S&P 500 Index is a MARKET-WEIGHTED INDEX composed of approximately 500 COMMON STOCKS of large U.S. companies in a wide range of businesses chosen by Standard & Poor's based on a number of factors, including industry representation, market value, economic sector and operating/financial condition. As of December 31, 2006, the MARKET CAPITALIZATIONS of companies in the S&P 500 Index ranged from $1.4 billion to $446.9 billion.
The Fund does not necessarily invest in all of the securities in the S&P 500 Index, or in the same weightings. The Fund's portfolio manager chooses investments so that the market capitalizations, industry weightings and other fundamental characteristics of the securities chosen are similar to the S&P 500 Index as a whole.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
INDEX FUND RISK - the Fund does not use defensive strategies or attempt to reduce its exposure to poor performing securities. Correlation between the Fund's performance and that of the index may be negatively affected by the Fund's expenses, changes in the composition of the index, and the timing of purchase and redemption of Fund shares. Further, the Fund has operating expenses, while the index does not. Therefore, the Fund will tend to underperform the index to some degree over time.
DERIVATIVES RISK - the risk of disproportionately increased losses and reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
If the value of the Fund's investments goes down, you may lose money.
GARTMORE INDEX SERIES | 17
SECTION 1 GARTMORE S&P 500 INDEX FUND SUMMARY AND PERFORMANCE (cont.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - LOCAL FUND SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
1999 2000 2001 2002 2003 2004 2005 2006 20.10% -9.40% -12.40% -22.50% 28.30% 10.58% 4.65% 15.52% |
BEST QUARTER: 15.21% - 2ND QTR OF 2003
WORST QUARTER: -17.36% - 3RD QTR OF 2002
18 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE S&P 500 INDEX FUND SUMMARY AND PERFORMANCE (cont.)
After-tax returns are shown in the table for Local Fund shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
1 YEAR 5 YEARS (JULY 24, 1998)
--------------------------------------------------------------------------------
Class A shares - Before Taxes(2) 8.69% 4.41% 3.03%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(2) 9.54% 4.57% 3.18%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(3),(4) 13.50% 4.90% 3.18%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(5) 15.52% 5.86% 3.91%
--------------------------------------------------------------------------------
Service Class shares - Before Taxes(2) 15.15% 5.52% 3.58%
--------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes(2) 15.37% 5.69% 3.76%
--------------------------------------------------------------------------------
Institutional Class shares -
Before Taxes(2) 15.63% 5.95% 4.04%
--------------------------------------------------------------------------------
Local Fund shares - Before Taxes 15.52% 5.86% 3.91%
--------------------------------------------------------------------------------
Local Fund shares - After Taxes on
Distributions 15.15% 5.52% 3.52%
--------------------------------------------------------------------------------
Local Fund shares - After Taxes on
Distributions and Sale of Shares 10.51% 4.95% 3.20%
--------------------------------------------------------------------------------
S&P 500 Index(5) 15.79% 6.19% 4.47%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 These returns for the period prior to the creation of a particular class are based on the previous performance of the Fund's Local Fund shares. These returns were achieved prior to the creation of Class A, Class B and Institutional Class shares (12/29/99) and Service Class and Institutional Service Class shares (11/2/98). Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class A, Class B, Institutional Class, Service Class and Institutional Service Class shares would have produced because all classes invest in the same portfolio of securities. The performance for these classes has been restated to reflect differences in sales charges (where applicable), but does not reflect the differing levels of other fees (primarily Rule 12b-1 and/or administrative services fees) applicable to such classes; if these fees were reflected, the performance for Class A, Class B, Service Class and Institutional Service Class would have been lower.
3 These returns until the creation of Class C shares (10/22/03) are based on the previous performance of the Fund's Local Fund shares for the period through December 28, 1999 and the Fund's Class B shares for the period from December 29, 1999 to October 21, 2003. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class C shares would have produced because all classes invest in the same portfolio of securities. The performance for Class C shares has been restated to reflect differences in sales charges (where applicable), but does not reflect the differing levels of other fees (primarily Rule 12b-1 and/or administrative services fees) applicable to Class C shares; if these fees were reflected, the performance for Class C shares would have been lower.
4 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
5 Class R shares commenced operations on January 30, 2007. The returns shown in the table are based on the performance of the Fund's Local Fund shares. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. The performance of Class R shares has been restated to reflect differences in sales charges, if any, but does not reflect the higher level of other fees applicable to such class; if these fees were reflected, the performance for Class R shares would have been lower.
6 The S&P 500 Index is an unmanaged, market capitalization-weighted index that measures the performance of 500 widely held stocks of large-cap U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE INDEX SERIES | 19
SECTION 1 GARTMORE S&P 500 INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
--------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES SERVICE INSTITUTIONAL INSTITUTIONAL LOCAL (PAID DIRECTLY CLASS A CLASS B CLASS C CLASS R CLASS SERVICE CLASS CLASS FUND FROM YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES --------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75% (2) None None None None None None None --------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None 5.00%(3) 1.00%(4) None None None None None --------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(5) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% --------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) --------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% 0.13% --------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% 0.15% None None 0.07% --------------------------------------------------------------------------------------------------------------------------- Other Expenses(6) 0.14% 0.13% 0.13% 0.33% 0.38% 0.38% 0.13% 0.13% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.52% 1.26% 1.26% 0.96% 0.66% 0.51% 0.26% 0.33% --------------------------------------------------------------------------------------------------------------------------- Amount of Fee Waiver/ Expense Reimbursement(7) 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% 0.03% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/ REIMBURSEMENTS) 0.49% 1.23% 1.23% 0.93% 0.63% 0.48% 0.23% 0.30% --------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may also charge you a transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
4 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
5 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
6 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R,Service Class and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Service Class and Institutional Service Class shares were 0.01%, 0.25% and 0.25%,respectively. Administrative services fees for Class R shares are estimated to be 0.20% for the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time for Class A and Class R shares because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 0.23% for all share classes until at least February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided however, that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 0.73% for Class A shares and 0.98% for Class R shares before the Adviser would be required to further limit the Fund's expenses.
20 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE S&P 500 INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses, and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares $622 $729 $846 $1,187
--------------------------------------------------------------------------------
Class B shares 625 697 889 1,219
--------------------------------------------------------------------------------
Class C shares 225 397 689 1,520
--------------------------------------------------------------------------------
Class R shares 95 303 528 1,175
--------------------------------------------------------------------------------
Service Class shares 64 208 365 820
--------------------------------------------------------------------------------
Institutional Service Class shares 49 161 282 638
--------------------------------------------------------------------------------
Institutional Class shares 24 81 143 328
--------------------------------------------------------------------------------
Local Fund shares 31 103 182 415
--------------------------------------------------------------------------------
|
You would pay the following expenses on the same investment if you did not sell your shares*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $125 $397 $689 $1,219
--------------------------------------------------------------------------------
Class C shares 125 397 689 1,520
--------------------------------------------------------------------------------
|
* Expenses paid on the same investment in Class A,Class R, Institutional Service Class, Service Class, Institutional Class and Local Fund shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE INDEX SERIES | 21
SECTION 1 GARTMORE SMALL CAP INDEX FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks to match the performance of the Russell 2000(R) Index ("Russell 2000 Index") as closely as possible before the deduction of Fund expenses.
PRINCIPAL STRATEGIES
The Fund employs a "passive" management approach, investing in a portfolio of assets whose performance is expected to match approximately the performance of the Russell 2000 Index before the deduction of Fund expenses. Under normal circumstances, the Fund invests at least 80% of the value of its net assets in a statistically selected sampling of EQUITY SECURITIES of companies included in the Russell 2000 Index and in DERIVATIVE instruments linked to the Russell 2000 Index, primarily futures contracts.
The Russell 2000 Index is a MARKET-WEIGHTED INDEX composed of approximately 2,000 COMMON STOCKS of smaller U.S. companies in a wide range of businesses chosen by The Frank Russell Company based on a number of factors, including industry representation, market value, economic sector and operating/financial condition. As of January 31, 2007, the MARKET CAPITALIZATIONS of companies in the Russell 2000 Index ranged from $74 million to $3.49 billion.
The Fund does not necessarily invest in all of the securities in the Russell 2000 Index, or in the same weightings. The Fund's portfolio managers choose investments so that the market capitalizations, industry weightings and other fundamental characteristics of the securities chosen are similar to the Russell 2000 Index as a whole.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
INDEX FUND RISK - the Fund does not use defensive strategies or attempt to reduce its exposure to poor performing securities. Correlation between the Fund's performance and that of the index may be negatively affected by the Fund's expenses, changes in the composition of the index, and the timing of purchase and redemption of Fund shares. Further, the Fund has operating expenses, while the index does not. Therefore, the Fund will tend to underperform the index to some degree over time.
SMALL-CAP RISK - results from investing in stocks of smaller companies. Securities of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
DERIVATIVES RISK - derivatives can disproportionately increase losses and reduce opportunities for gains when the security prices, interest rates, currency values or other such measures underlying derivatives change in unexpected ways. They also present default risks if the counterparty to a derivatives contract fails to fulfill its obligations to the Fund.
If the value of the Fund's investments goes down, you may lose money.
22 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE SMALL CAP INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
The Fund commenced operations on December 29, 1999 and until October 15, 2001 invested all of its assets in the Master Small Cap Series ("Series"), which was also managed by the Fund's subadviser. The returns shown for 1998 and through December 28, 1999 include the performance of the Series. The returns for the period prior to commencement of operations are not adjusted for the Fund's higher expenses and, therefore, the Fund's actual returns would have been lower. The returns reflect the Fund's actual Class A expenses from December 29, 1999 through December 31, 2006. However, on October 15, 2001, the Fund's assets were redeemed from the Series and since that time have been managed by the Fund.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CODE]
1998 1999 2000 2001 2002 2003 2004 2005 2006 ------------------------------------------------------------------------------ -2.30% 21.80% -6.20% 1.70% -20.90% 45.40% 17.76% 4.34% 17.20% |
BEST QUARTER: 22.86% - 2ND QTR OF 2003
WORST QUARTER: -21.16% - 3RD QTR OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
1 YEAR 5 YEARS (DEC. 29, 1999)
--------------------------------------------------------------------------------
Class A shares - Before Taxes(2) 10.43% 9.31% 8.91%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions(2) 8.49% 8.35% 8.35%
--------------------------------------------------------------------------------
Class A shares - After Taxes on
and Sale of Shares(2) 8.18% 7.74% 7.68%
--------------------------------------------------------------------------------
Class B shares - Before Taxes(3) 11.51% 9.63% 9.21%
--------------------------------------------------------------------------------
Class C shares - Before Taxes(3),(4) 15.54% 9.95% 9.23%
--------------------------------------------------------------------------------
Class R shares - Before Taxes(5) 17.20% 10.61% 9.58%
--------------------------------------------------------------------------------
Institutional Class Shares -
Before Taxes(2) 17.75% 11.07% 9.93%
--------------------------------------------------------------------------------
Russell 2000 Index(6) 18.37% 11.39% 10.29%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 These returns until the creation of Class A and Institutional Class shares (12/29/99) are based on the previous performance of the Series, which began operations on April 9, 1997. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class A and Institutional Class shares would have produced because all classes invest in the same portfolio of securities. The performance for Class A and Institutional Class has been restated to reflect differences in sales charges (where applicable), but does not reflect the differing levels of other fees applicable to such classes; if these fees were reflected, the performance for Class A and Institutional Class shares would have been lower.
3 These returns until the creation of Class B shares (11/29/01) include performance based on the Series for the period through December 28, 1999 and the Fund's Class A shares for the period from December 29, 1999 to November 28, 2001. These returns until the creation of Class C shares (10/22/03) are based on the previous performance of the Series for the period through December 28, 1999 and the Fund's Class A shares for the period from December 29, 1999 to November 28, 2001 and the Fund's Class B shares for the period from November 29, 2001 to October 21, 2003. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class B and Class C shares would have produced because all classes invest in the same portfolio of securities. The performance for Class B and Class C shares has been restated to reflect differences in sales charges, but does not reflect the differing levels of other fees (primarily Rule 12b-1 and/or administrative services fees) applicable to such classes; if these fees were reflected, the performance for Class B and Class C shares would have been lower.
4 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
5 Class R shares have not commenced operations. These returns are based on the performance of the Fund's Class A shares. Excluding the effect of any fee waivers or reimbursements, such prior performance is similar to what Class R shares would have produced because both classes invest in the same portfolio of securities. The performance of Class R shares has been restated to reflect differences in sales charges, if any, but does not reflect the higher level of other fees applicable to such class; if these fees were reflected, the performance for Class R shares would have been lower.
6 The Russell 2000 Index is an unmanaged index that measures the performance of the stocks of small-capitalization U.S. companies. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE INDEX SERIES | 23
SECTION 1 GARTMORE SMALL CAP INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund, depending on the share class you select.
--------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES INSTITUTIONAL FROM YOUR INVESTMENT)(1) CLASS SHARES --------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None --------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None 5.00%(3) 1.00%(4) None None --------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(5) 2.00% 2.00% 2.00% 2.00% 2.00% --------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) --------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.20% 0.20% 0.20% 0.20% 0.20% --------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None --------------------------------------------------------------------------------------------------------------------------- Other Expenses(6) 0.29% 0.14% 0.14% 0.34% 0.14% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 0.74% 1.34% 1.34% 1.04% 0.34% --------------------------------------------------------------------------------------------------------------------------- Amount of Fee Waiver/ Expense Reimbursement(7) 0.04% 0.04% 0.04% 0.04% 0.04% --------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 0.70% 1.30% 1.30% 1.00% 0.30% --------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may also charge you a transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
4 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
5 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within seven calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
6 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A and Class R shares. For the fiscal year ended October 31, 2006, administrative services fees for Class A were 0.15%. Administrative services fees for Class R shares are estimated to be 0.20% for the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 0.30% for all share classes until at least February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided however, that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/ Reimbursements)" could increase to 0.80% for Class A shares and 1.05% for Class R shares before the Adviser would be required to further limit the Fund's expenses.
24 | GARTMORE INDEX SERIES
SECTION 1 GARTMORE SMALL CAP INDEX FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares $642 $794 $959 $1,437
--------------------------------------------------------------------------------
Class B shares 632 721 930 1,367
--------------------------------------------------------------------------------
Class C shares 232 421 730 1,609
--------------------------------------------------------------------------------
Class R shares 102 327 570 1,267
--------------------------------------------------------------------------------
Institutional Class shares 31 105 187 427
--------------------------------------------------------------------------------
|
You would pay the following expenses on the same investment if you did not sell your shares*:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $132 $421 $730 $1,367
--------------------------------------------------------------------------------
Class C shares 132 421 730 1,609
--------------------------------------------------------------------------------
|
* Expenses paid on the same investment in Class A,Class R and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE INDEX SERIES | 25
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS,
INVESTMENT TECHNIQUES AND RISKS
MORE ABOUT INDEX FUNDS
None of the Funds attempts to buy or sell securities based on Fund management's
economic, financial or market analysis, but instead employs a "passive"
investment approach. This means that Fund management attempts to invest in a
portfolio of assets whose performance is expected to match approximately the
performance of the respective index before deduction of Fund expenses. A Fund
will buy or sell securities only when Fund management believes it is necessary
to do so in order to match the performance of the respective index. Accordingly,
it is anticipated that the portfolio turnover and trading costs for each Fund
(except Gartmore Bond Index Fund) may be lower than that of an "actively"
managed fund. However, the Funds have operating and other expenses, while an
index does not. Therefore, each Fund will tend to underperform its target index
to some degree over time. It is not possible to invest directly in an index
itself.
The Funds may invest in derivative securities, primarily exchange traded futures contracts. The use of derivatives allows a Fund to increase or decrease exposure to its target index quickly, with less cost than buying or selling securities. Each Fund will invest in options, futures and other derivative instruments in the following circumstances:
o purchases of Fund shares increase;
o to provide liquidity for redemptions of Fund shares and
o to keep trading costs low.
In connection with the use of derivative instruments, a Fund may enter into short sales in order to adjust the weightings of particular securities represented in a derivative to more accurately reflect the securities' weightings in the target index.
Each of the Funds may utilize a "full replication" strategy. However, when the subadviser believes it would be cost efficient or where an index includes a particularly high number of securities, a Fund may deviate from full replication and instead invest in a sampling of stocks in its relevant index using the subadviser's "optimization process". The optimization process is a statistical sampling technique that aims to create a portfolio that has aggregate characteristics, such as average market capitalization and industry weightings, similar to those of the relevant index as a whole, but involves lower transaction costs than would be incurred using a full replication strategy. Each Fund may also purchase securities not included in the relevant index when the subadviser believes it is a cost-efficient way to approximate the performance of the relevant index. If a Fund uses these techniques, it may not track its relevant index as closely as if that Fund were fully replicating the index.
OTHER INVESTMENTS
In addition to the investment strategies described below, the Funds may invest
in illiquid securities and repurchase agreements and may lend securities. To
maintain liquidity, the Funds also invest in short-term money market instruments
that are considered equivalent to cash. These instruments may include
obligations of the U.S. government, its agencies or instrumentalities; highly
rated bonds or comparable unrated bonds; commercial paper; bank obligations; and
repurchase agreements. To the extent that a Fund invests in short-term money
market instruments, it generally also invests in options, futures or other
derivatives in order to maintain full exposure to its target index, as described
above. The Funds do not invest in derivative securities or short-term money
market instruments as a defensive strategy to lessen their exposure to common
stocks or bonds.
GARTMORE BOND INDEX FUND
The Lehman Aggregate Index is a market-weighted index comprised of approximately
6,500 dollar-denominated investment grade bonds with maturities greater than one
year. Lehman Brothers selects bonds for the Lehman Aggregate Index based on its
criteria for the Index and does not evaluate whether any particular bond is an
attractive investment. Lehman Brothers may periodically update the Lehman
Aggregate Index, at which time there may be substantial changes in the
composition of the Index. These composition changes may result in significant
turnover in the Fund's portfolio as the Fund attempts to mirror the changes.
The Gartmore Bond Index Fund may trade securities in segments of the portfolio to the extent necessary to closely mirror the duration of corresponding segments of the Index. Accordingly, the Fund may have a higher portfolio turnover rate than the other Funds.
All debt obligations purchased are determined to be within the top four categories by a rating agency at the time of investment. Fund management monitors any subsequent rating downgrade of a security to consider what action, if any, should be taken. Downgraded securities are not required to be sold.
The Fund usually invests a substantial portion of its assets in mortgage-backed securities, which may be either pass-through securities or collateralized mortgage obligations.
The Fund may purchase securities on a when-issued basis, and it may also purchase or sell securities for delayed delivery. When entering into such a transaction, the Fund buys or sells securities with payment and delivery scheduled to take place in the future, enabling the Fund to lock in a favorable yield and price.
26 | GARTMORE INDEX SERIES
SECTION 2 FUND DETAILS (CONT.)
The Fund may also enter into "dollar rolls", in which the Fund sells securities for delivery in the current month and simultaneously contracts to repurchase substantially similar securities on a future date from the same party. During the period between the Fund's sale of one security and purchase of a similar security, the Fund will not receive principal and interest payments.
The Fund may also enter into standby commitment agreements in which the Fund is committed, for a certain period of time, to buy a stated amount of a fixed-income security that may be issued and sold to the Fund at the option of the issuer. The price of the security is fixed at the time of the commitment, and the Fund is paid a commitment fee whether or not the security is issued.
GARTMORE INTERNATIONAL INDEX FUND
The MSCI EAFE Index is composed of equity securities of larger capitalization
companies from various industries whose primary trading markets are in developed
markets outside the United States. The countries currently included in the MSCI
EAFE Index are Australia, Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Hong Kong, Ireland, Italy, Japan, The Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The
country weightings are based on each country's relative market capitalization.
Morgan Stanley Capital International Limited ("Morgan Stanley") chooses the stocks in the MSCI EAFE Index based on factors including market capitalization, trading activity and the overall mix of industries represented in the Index. The MSCI EAFE Index is generally considered to broadly represent the performance of international stocks. Morgan Stanley selects stocks for the MSCI EAFE Index based on criteria for the Index and does not evaluate whether any particular stock is an attractive investment.
Morgan Stanley may periodically update the MSCI EAFE Index, at which time there may be substantial changes in the composition of the Index. These composition changes may result in significant turnover in the Fund's portfolio as the Fund attempts to mirror the changes.
GARTMORE MID CAP MARKET INDEX FUND
The S&P 400 Index is composed of 400 common stocks issued by U.S.
mid-capitalization companies in a wide range of businesses and is generally
considered to broadly represent the performance of publicly traded U.S.
mid-capitalization stocks. The S&P 400 Index is a market-weighted index, which
means that the stocks of the largest companies in the index have the greatest
effect on its performance. Standard & Poor's selects the stocks in the S&P 400
Index based on its criteria for the Index and does not evaluate whether any
particular stock is an attractive investment. Standard & Poor's periodically
updates the S&P 400 Index, at which time there may be substantial changes in the
composition of the Index. These composition changes may result in significant
turnover in the Fund's portfolio as the Fund attempts to mirror those changes.
GARTMORE S&P 500 INDEX FUND
The S&P 500 Index is composed of approximately 500 common stocks selected by
Standard & Poor's, most of which are listed on the New York Stock Exchange. The
S&P 500 Index is generally considered to broadly represent the performance of
publicly traded U.S. larger capitalization stocks, although a small part of the
S&P 500 Index is made up of foreign companies that have a large U.S. presence.
Standard & Poor's selects stocks for the S&P 500 Index based on its criteria for
the Index and does not evaluate whether any particular stock is an attractive
investment. Standard & Poor's periodically updates the S&P 500 Index, at which
time there may be substantial changes in the composition of the Index. These
composition changes may result in significant turnover in the Fund's portfolio
as the Fund attempts to mirror the changes.
GARTMORE SMALL CAP INDEX FUND
The Russell 2000 Index is composed of common stocks of small- cap U.S.
companies; it includes the smallest 2,000 companies in the Russell 3000(R)
Index, which measures the performance of the largest 3,000 U.S. companies, based
on market capitalization. The Russell 2000 Index is generally considered to
broadly represent the performance of publicly traded U.S. smaller-capitalization
stocks. The Frank Russell Company selects stocks for the Russell 2000 Index
based on its criteria for the Index and does not evaluate whether any particular
stock is an attractive investment. The Frank Russell Company updates the Russell
2000 Index once annually, at which time there may be substantial changes in the
composition of the Index (and consequently, significant turnover in the Fund).
Stocks of companies that merge, are acquired or otherwise cease to exist during
the year are not replaced in the Index until the annual update.
GARTMORE INDEX SERIES | 27
SECTION 2 FUND DETAILS (CONT.)
ADDITIONAL RISKS APPLICABLE TO ALL FUNDS
DERIVATIVES RISK is the risk that the use of derivative securities could
disproportionately increase losses and/or reduce opportunities for gains when
security prices, currency rates or interest rates change in unexpected ways.
The Funds may invest in derivatives, primarily futures and options.
Derivatives investing involves several different risks, including the risks that:
o the other party in the derivatives contract may fail to fulfill its
obligations;
o the use of derivatives may reduce liquidity and make a Fund harder to
value, especially in declining markets;
o a Fund may suffer disproportionately heavy losses relative to the amount of
assets it has invested in derivative contracts and
o changes in the value of the derivative contracts or other hedging
instruments may not match or fully offset changes in the value of the
hedged portfolio securities, thereby failing to achieve the original
purpose for using the derivatives.
SECURITIES LENDING - Each of the Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances, these events could trigger adverse tax consequences to a Fund.
BORROWING RISK - Each of the Funds may borrow for temporary emergency purposes, including to meet redemptions. Borrowing may exaggerate changes in the net asset value of Fund shares and in the yield on a Fund's portfolio. Borrowing will cost a Fund interest expense and other fees. The cost of borrowing may reduce a Fund's return.
ADDITIONAL RISKS APPLICABLE TO GARTMORE BOND INDEX FUND
DOLLAR ROLLS RISK - the market value of securities the Fund is committed to buy
may decline below the price of the securities it has sold. These transactions
involve leverage. The Fund will engage in dollar rolls to enhance return and not
for the purpose of borrowing.
EVENT RISK - a corporate event such as a restructuring, merger, leveraged buyout, takeover or similar action may cause a decline in market value or credit quality of a company's stocks or bonds due to factors including an unfavorable market response or a resulting increase in the company's debt. Added debt may significantly reduce the credit quality and market value of a company's bonds.
MORTGAGE-BACKED SECURITIES - these fixed-income securities represent the right to receive a portion of principal and/or interest payments made on a pool of residential or commercial mortgage loans. When interest rates fall, borrowers may refinance or otherwise repay principal on their loans earlier than scheduled. When this happens, certain types of mortgage-backed securities will be paid off more quickly than originally anticipated and a Fund will have to invest the proceeds in securities with lower yields. This risk is known as "prepayment risk." When interest rates rise, certain types of mortgage-backed securities will be paid off more slowly than originally anticipated and the value of these securities will fall. This risk is known as "extension risk."
Because of prepayment risk and extension risk, mortgage-backed securities react differently to changes in interest rates than other fixed-income securities. Small movements in interest rates (both increases and decreases) may quickly and significantly reduce the value of certain mortgage-backed securities.
FOREIGN GOVERNMENT DEBT SECURITIES RISK - a government entity may delay or refuse to pay interest or repay principal on its debt for reasons including cash flow problems, insufficient foreign currency reserves, political considerations, relative size of its debt position to its economy or failure to put economic reforms required by the International Monetary Fund into place. If a government entity defaults, it generally will ask for more time to pay or request further loans. There is no bankruptcy proceeding by which all or part of the debt securities that a government entity has not repaid may be collected.
U.S. GOVERNMENT SECURITIES AND U.S. GOVERNMENT AGENCY SECURITIES - U.S. government securities include Treasury bills, notes and bonds issued or guaranteed by the U.S. government. Because these securities are backed by the full faith and credit of the U.S. government, they present little credit risk. However, the U.S. government does not guarantee the market value of its securities, and interest rate changes, prepayment rates and other factors may affect the value of U.S. government securities.
U.S. government agency securities may include obligations issued by:
o the Federal Housing Administration, the Farmers Home Administration and the
Government National Mortgage Association ("GNMA"), including GNMA
pass-through certificates,
o the Federal Home Loan Banks,
o the Federal National Mortgage Association ("FNMA"),
o the Federal Home Loan Mortgage Corporation ("FHLMC") and
o the Federal Farm Credit Banks.
Unlike U.S. government securities, U.S. government agency securities have different levels of credit support from the government. GNMA pass-through mortgage certificates are backed by the full faith and credit of the U.S. government. While FNMA, FHLMC and the Federal Home Loan Banks are chartered by Acts of Congress, their securities are backed only by the credit of the respective instrumentality and are not issued or guaranteed by the U.S. government. Although certain government agency securities are guaranteed, market price and yield of the securities and net asset value and performance of a Fund are not guaranteed.
28 | GARTMORE INDEX SERIES
SECTION 2 FUND DETAILS (CONT.)
ADDITIONAL RISKS APPLICABLE TO GARTMORE BOND INDEX FUND
AND GARTMORE INTERNATIONAL INDEX FUND
FOREIGN SECURITIES RISK - foreign securities may be more volatile, harder to
price and less liquid than U.S. securities. Foreign investments involve the
following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include that a foreign jurisdiction might impose or increase withholding taxes on income payable on foreign securities; possible seizure, nationalization or expropriation of the foreign issuer or foreign deposits (in which the Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls.
The Gartmore Bond Index Fund may invest in foreign securities to the extent that foreign securities are present in the Lehman Aggregate Index. The Lehman Aggregate Index may also include a portion of foreign securities. The Fund will invest only in U.S. dollar-denominated foreign securities.
ADDITIONAL RISKS APPLICABLE TO GARTMORE MID CAP MARKET INDEX FUND AND GARTMORE SMALL CAP INDEX FUND MID-CAP AND SMALL-CAP RISK - Investments in mid-sized and smaller, newer companies may involve greater risk than investments in larger, more established companies because their stocks are usually less stable in price and less liquid. To the extent a Fund invests in stocks of small and mid-sized companies, it may be subject to increased risk.
ADDITIONAL RISKS APPLICABLE TO ALL FUNDS EXCEPT GARTMORE
BOND INDEX FUND
STOCK MARKET RISK - The Funds could lose value if the individual stocks in which
it has invested and/or the overall stock markets on which the stocks trade
decline in price. Stocks and stock markets may experience short-term volatility
(price fluctuation) as well as extended periods of price decline or little
growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock,
such as growth or value stocks, small or large stocks, or stocks within a
particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
TEMPORARY INVESTMENTS - Each of the Funds generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances or anticipated redemptions, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances and interest-bearing savings
deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may
invest directly and
o shares of other investment companies that invest in securities in which the
Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
GARTMORE INDEX SERIES | 29
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Fund's respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
Each Fund pays the Adviser a management fee based on each Fund's average daily net assets. The total management fee paid by the Funds,including the fee paid to the subadviser,for the fiscal year ended October 31, 2006, expressed as a percentage of each Fund's average daily net assets and taking into account any applicable waivers, was as follows:
FUND ACTUAL MANAGEMENT FEE PAID -------------------------------------------------------------------------------- Gartmore Bond Index Fund 0.22% -------------------------------------------------------------------------------- Gartmore International Index Fund 0.27% -------------------------------------------------------------------------------- Gartmore Mid Cap Market Index Fund 0.22% -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund 0.13% -------------------------------------------------------------------------------- Gartmore Small Cap Index Fund 0.20% -------------------------------------------------------------------------------- |
The total annual advisory fees (as a percentage of average daily net assets) that can be paid to the Adviser and Subadviser (as defined below) are as follows:
ADVISORY SUBADVISORY
FUND ASSETS FEE FEE
--------------------------------------------------------------------------------
Gartmore Bond
Index Fund $0 up to $1.5 billion 0.22% 0.08%
--------------------------------------------------------------------------------
$1.5 billion up to $3 billion 0.21% 0.06%
--------------------------------------------------------------------------------
$3 billion and more 0.20% 0.05%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gartmore International
Index Fund $0 up to $1.5 billion 0.27% 0.11%
--------------------------------------------------------------------------------
$1.5 billion up to $3 billion 0.26% 0.085%
--------------------------------------------------------------------------------
$3 billion and more 0.25% 0.075%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gartmore Mid Cap
Market Index Fund $0 up to $1.5 billion 0.22% 0.075%
--------------------------------------------------------------------------------
$1.5 billion up to $3 billion 0.21% 0.060%
--------------------------------------------------------------------------------
$3 billion and more 0.20% 0.050%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gartmore S&P 500
Index Fund(1) $0 up to $1.5 billion 0.13% 0.020%
--------------------------------------------------------------------------------
$1.5 billion up to $3 billion 0.12% 0.015%
--------------------------------------------------------------------------------
$3 billion up to $4.5 billion 0.11% 0.0125%
--------------------------------------------------------------------------------
$4.5 billion and more 0.10% 0.01%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gartmore Small Cap
Index Fund $0 up to $1.5 billion 0.20% 0.07%
--------------------------------------------------------------------------------
$1.5 billion up to $3 billion 0.19% 0.06%
--------------------------------------------------------------------------------
$3 billion and more 0.18% 0.05%
--------------------------------------------------------------------------------
|
1 Effective May 1, 2006, an additional breakpoint was implemented for the Gartmore S&P 500 Index Fund as shown in this chart.
A discussion regarding the basis for the Board of Trustees annual re-approval of the investment advisory and subadvisory agreements for the Funds will be available in the Funds' semiannual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
SUBADVISER
Subject to the supervision of the Adviser and the Board of Trustees, BlackRock Investment Management, LLC ("BlackRock"), 800 Scudder Mills Road, Plainsboro, New Jersey 08536, is the Funds' subadviser and manages each Fund's assets in accordance with its investment objective and strategies. BlackRock makes investment decisions for the Funds and, in connection with such investment decisions, places purchase and sell orders for securities.
The Adviser pays BlackRock a subadvisory fee out of its management fee. The Adviser paid BlackRock an annual subadvisory fee for the fiscal year ended October 31, 2006, based on each Fund's average daily net assets, as follows:
FUND FEE -------------------------------------------------------------------------------- Gartmore Bond Index Fund 0.08% -------------------------------------------------------------------------------- Gartmore International Index Fund 0.11% -------------------------------------------------------------------------------- Gartmore Mid Cap Market Index Fund 0.08% -------------------------------------------------------------------------------- Gartmore S&P 500 Index Fund 0.02% -------------------------------------------------------------------------------- Gartmore Small Cap Index Fund 0.07% -------------------------------------------------------------------------------- |
30 | GARTMORE INDEX SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
PORTFOLIO MANAGEMENT
GARTMORE BOND INDEX FUND
The Gartmore Bond Index Fund is managed by a team comprised of Keith Anderson, Scott Amero, Matthew Marra and Andrew Phillips. This team is responsible for the day-to-day management of the Fund's investments.
Keith Anderson is a Vice Chairman and member of the Executive and Management Committees of BlackRock. Mr. Anderson is BlackRock's Chief Investment Officer for Fixed Income. Mr. Anderson is Chairman of the Investment Strategy Group and is responsible for global fixed income strategy, asset allocation and the overall management of client portfolios. In this capacity, he coordinates BlackRock's team of portfolio managers and credit analysts who specialize in the government, agency, corporate and mortgage sectors and sub-sectors worldwide. Mr. Anderson has been with BlackRock since 1988.
Scott Amero is a Managing Director of BlackRock and co-head of BlackRock's fixed income portfolio management team. He is a member of the Management Committee and the Investment Strategy Group. Mr. Amero is a senior strategist and portfolio manager with responsibility for overseeing all fixed income sector strategy and the overall management of client portfolios. He is also the head of global credit research. He is a director of Anthracite Capital, Inc., BlackRock's publicly-traded real estate investment trust. Mr. Amero has been with BlackRock since 1990.
Matthew Marra is a Managing Director of and portfolio manager with BlackRock and is a member of the Investment Strategy Group. Mr. Marra's primary responsibility is managing total return portfolios, with a sector emphasis on Treasury and agency securities. Mr. Marra became part of the Portfolio Management Group in 1997. He joined BlackRock in 1995 as an analyst in the Portfolio Analytics Group.
Andrew Phillips is a Managing Director of and portfolio manager with BlackRock and is a member of the Investment Strategy Group. Mr. Phillips has been a Managing Director of BlackRock since 1999 and a portfolio manager therewith since 1995. Mr. Phillips' primary responsibility is the consistent implementation of investment strategies across all total return accounts, with a sector emphasis on mortgage securities. He is a Chairman of the monthly Account Review Meeting, which examines performance, compliance, and operations for all client portfolios.
GARTMORE INTERNATIONAL INDEX FUND, GARTMORE
MID CAP MARKET INDEX FUND, GARTMORE S&P 500
Index Fund and Gartmore Small Cap Index Fund
Each Fund is managed by Debra L. Jelilian and Jeffrey L. Russo, CFA, who are members of the Quantitative Index Management Team. Ms. Jelilian and Mr. Russo are jointly responsible for the day-to-day management of each Fund's portfolio and each is responsible for the selection of each Fund's investments.
Ms. Jelilian is a Director of BlackRock, which she joined in 2006. Prior to joining BlackRock, Ms. Jelilian was a Director of Fund Asset Management, L.P. from 1999 to 2006, and has been a member of the Funds' management team since 2000. Ms. Jelilian has 14 years experience in investing and in managing index investments.
Mr. Russo is a Director of BlackRock, which he joined in 2006. Prior to joining BlackRock, Mr. Russo was a Director of Fund Asset Management, L.P. from 2004 to 2006, and was a Vice President thereof from 1999 to 2004. He has been a member of the Funds' management team since 2000. Mr. Russo has 11 years experience as a portfolio manager and trader.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a nonaffiliated subadviser with the approval of the Board of Trustees but without shareholder approval. If a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows the Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic
consultations;
o communicating performance expectations and evaluations to the subadvisers
and
o making recommendations to the Board of Trustees regarding renewal,
modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
GARTMORE INDEX SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the rightcompares Class A, Class B and Class C shares, which are available to all investors.
Class R, Institutional Service Class, Service Class, Local Fund and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class, Service Class, Local Fund and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES
Front-end sales charge A front-end sales charge means
up to 5.75% that a portion of your initial
investment goes toward the sales
charge and is not invested.
Annual service and/or Reduction and waivers of sales
12b-1 fee of 0.25% charges may be available.
Administrative services Total annual operating expenses
fee up to 0.25% are lower than Class B and
Class C expenses, which means
higher dividends and/or net
asset value ("NAV") per share.
No conversion feature.
No maximum investment amount.
--------------------------------------------------------------------------------
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means
your full investment immediately
goes toward buying shares.
No reduction of CDSC, but waivers
may be available.
The CDSC declines 1% in most years
to zero after six years.
Annual service and/or Total annual operating expenses
12b-1 fee of 1.00% are higher than Class A
No administrative expenses, which means lower
services fee dividends and/or NAV per share.
Automatic conversion to Class A
shares after seven years, which
means lower annual expenses in
the future.
Maximum investment amount of
$100,000. Larger investments may
be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means
your full investment immediately
goes toward buying shares.
No reduction of CDSC, but waivers
may be available.
The CDSC declines to zero after
one year.
Annual service and/or Total annual operating expenses
12b-1 fee of 1.00% are higher than Class A
No administrative expenses, which means lower
services fee dividends and/or NAV per share.
No conversion feature.
Maximum investment amount of
$1,000,000 (1) Larger
investments may be rejected.
--------------------------------------------------------------------------------
|
1 This limit was calculated based on a one-year holding period.
32 | GARTMORE INDEX SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
SALES CHARGE AS A
PERCENTAGE OF
-------------------------- DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
------------------------------------------------------------------
$1 million or more None None None
------------------------------------------------------------------
|
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your
investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge
that would apply to a larger purchase than you are currently making (shown
in the table above), you and other family members living at the same
address can add the current value of any Class A, Class D, Class B or Class
C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you
currently own or are currently purchasing to the value of your Class A
purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds
of an insurance policy issued by any Nationwide Insurance company to
purchase Class A shares, you pay one-half of the published sales charge, as
long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account,
you qualify for a one-time reinvestment privilege. You may reinvest some or
all of the proceeds in shares of the same class without paying an
additional sales charge within 30 days of redeeming shares on which you
previously paid a sales charge. (Reinvestment does not affect the amount of
any capital gains tax due. However, if you realize a loss on your
redemption and then reinvest all or some of the proceeds, all or a portion
of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has
an agreement with Gartmore Distribution Services, Inc. (the "Distributor")
to waive sales charges;
o directors, officers, full-time employees, sales representatives and their
employees and investment advisory clients of a broker- dealer that has a
dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund
Class D shares (Class D shares are offered by other Gartmore Funds, but not
these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and
their affiliates and
o directors, officers, full-time employees (and their spouses, children or
immediate relatives) of sponsor groups that may be affiliated with the
Nationwide Insurance and Nationwide Financial companies from time to time.
GARTMORE INDEX SERIES | 33
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
The CDSC is waived on:
o the redemption of Class B or Class C shares purchased through reinvested
dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the
Automatic Withdrawal Program;
o Class B or Class C shares redeemed following the death or disability of a
shareholder, provided the redemption occurs within one year of the
shareholder's death or disability;
o mandatory withdrawals of Class B or Class C shares from traditional IRA
accounts after age 701/2 and for other required distributions from
retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement
plan administrators that maintain an agreement with the Funds or the
Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
If you qualify for a waiver of a CDSC, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. For more complete information, see the SAI.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years. If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
--------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
34 | GARTMORE INDEX SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
SHARE CLASSES AVAILABLE ONLY TO INSTITUTIONAL ACCOUNTS
The Funds offer Class R, Institutional Service Class, Institutional Class, Service Class and Local Fund shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
CLASS R SHARES
Class R shares are available to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement
plan's financial services firm has an agreement with the Distributor to use
Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE TO:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated
with brokers or dealers primarily engaged in the retail securities business
and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping
services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its
own account or for trust accounts for which it has authority to make
investment decisions as long as the accounts are part of a program that
collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high
net-worth individuals where the adviser is compensated by the Funds for
providing services or
o life insurance separate accounts using the investment to fund benefits for
variable annuity contracts issued to governmental entities as an investment
option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Funds;
o retirement plans for which no third-party administrator receives
compensation from the Funds;
o institutional advisory accounts of the Adviser or its affiliates, those
accounts which have client relationships with an affiliate of the Adviser,
its affiliates and their corporate sponsors, subsidiaries and related
retirement plans;
o rollover individual retirement accounts from such institutional advisory
accounts;
o a bank, trust company or similar financial institution investing for its
own account or for trust accounts for which it has authority to make
investment decisions as long as the accounts are not part of a program that
requires payment of Rule 12b-1 or administrative services fees to the
financial institution;
o registered investment advisers investing on behalf of institutions and high
net-worth individuals where the advisers derive compensation for advisory
services exclusively from clients or
o high net-worth individuals who invest directly without using the services
of a broker, investment adviser or other financial intermediary.
GARTMORE INDEX SERIES | 35
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
SERVICE CLASS SHARES
Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated
with brokers or dealers primarily engaged in the retail securities business
and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping
services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its
own account or for trust accounts for which it has authority to make
investment decisions as long as the accounts are part of a program that
collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high
net-worth individuals whose adviser is compensated by the Funds for
providing services or
o life insurance separate accounts using the investment to fund benefits for
variable annuity contracts issued to governmental entities as an investment
option for 457 or 401(k) plans.
LOCAL FUND SHARES
Local Fund shares are sold to funds of funds (mutual funds investing primarily in other mutual funds).
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept
or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment
Company Act of 1940, which permits Class A, Class B, Class C, Class R, Service
Class and Local Fund shares of the Funds to compensate the Distributor for
expenses associated with distributing and selling shares and providing
shareholder services through distribution and/or shareholder services fees.
These fees are paid to the Distributor and are either kept or paid to your
financial adviser or other intermediary for distribution and shareholder
services. Institutional Class and Institutional Service Class shares pay no
12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C, Class R, Service Class and Local Fund shares pay the Distributor annual amounts not exceeding the following:
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
Service Class shares 0.15% (distribution or service fee)
--------------------------------------------------------------------------------
Local Fund shares 0.07% (service fee)
--------------------------------------------------------------------------------
|
ADMINISTRATIVE SERVICES FEES
Class A, Class R, Service Class and Institutional Service Class shares of the
Funds are subject to fees pursuant to an Administrative Services Plan adopted by
the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1
fees for Class A, Class R and Service Class shares as described above.) These
fees are paid by the Funds to broker-dealers or other financial intermediaries
who provide administrative support services to beneficial shareholders on behalf
of the Funds. Under the Administrative Services Plan, a Fund may pay a
broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A,
Class R, Service Class and Institutional Service Class shares; however, many
intermediaries do not charge the maximum permitted fee or even a portion
thereof.
Because these fees are paid out of a Fund's Class A, Class R, Service Class and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make
payments for marketing, promotional or related services provided by
broker-dealers and other financial intermediaries that sell shares of the Trust
or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor
36 | GARTMORE INDEX SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (cont.)
these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares
of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
GARTMORE INDEX SERIES | 37
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' transfer agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's net asset value (NAV) to receive that day's NAV.
HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS.
THE OFFERING OF SHARES AT ANY TIME. ** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, intermediaries who are authorized to accept purchase,
exchange and redemption orders for the Funds. Your exchange and redemption orders for the Funds. Your
transaction is processed at the NAV next calculated after transaction is processed at the NAV next calculated after
the Funds' agent or an authorized intermediary receives your the Funds' agent or an authorized intermediary receives your
order in proper form. order in proper form.
-----------------------------------------------------------------------------------------------------------------------------
BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. mailing or faxing a letter to Gartmore Funds. The letter
dollars and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT must include your account number(s) and the name(s) of the
CASH, STARTER CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, Fund(s) you wish to exchange from and to. The letter must be
CREDIT CARD CHECKS OR MONEY ORDERS. signed by all account owners. We reserve the right to
request original documents for any faxed requests.
-----------------------------------------------------------------------------------------------------------------------------
BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The unless you decline this option on your application. The
Funds follow procedures to confirm that telephone Funds follow procedures to confirm that telephone
instructions are genuine and will not be liable for any instructions are genuine and will not be liable for any
loss, injury, damage or expense that results from executing loss, injury, damage or expense that results from executing
such instructions. The Funds may revoke telephone privileges such instructions. The Funds may revoke telephone privileges
at any time, without notice to shareholders. at any time, without notice to shareholders. For
redemptions, shareholders who own shares in an IRA account
should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed to
the address of record.
The Funds may record telephone instructions to redeem shares
and may request redemption instructions in writing, signed
by all shareholders on the account.
-----------------------------------------------------------------------------------------------------------------------------
ON-LINE. Transactions may be made through the Gartmore ON-LINE. Transactions may be made through the Gartmore
Funds' website. However, the Funds may discontinue on-line Funds' website. However, the Funds may discontinue on-line
transactions of Fund shares at any time. transactions of Fund shares at any time.
-----------------------------------------------------------------------------------------------------------------------------
BY BANK WIRE. You may have your bank transmit funds by BY BANK WIRE. The Funds can wire the proceeds of your
federal funds wire to the Funds' custodian bank. (The redemption directly to your account at a commercial bank. A
authorization will be in effect unless you give the Funds voided check must be attached to your application. (The
written notice of its termination.) authorization will be in effect unless you give the Funds
written notice of its termination.)
o if you choose this method to open a new account, you o your proceeds typically will be wired to your bank on
must call our toll- free number before you wire your the next business day after your order has been
investment and arrange to fax your completed processed.
application. o Gartmore Funds deducts a $20 service fee from the
o your bank may charge a fee to wire funds. redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in order to o your financial institution may also charge a fee for
receive the current day's NAV. receiving the wire.
o funds sent outside the U.S. may be subject to higher
fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
-----------------------------------------------------------------------------------------------------------------------------
BY AUTOMATED CLEARING HOUSE (ACH). You can fund your BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds
Gartmore Funds' account with proceeds from your bank via ACH can be sent to your bank via ACH on the second business day
on the second business day after your purchase order has after your order has been processed. A voided check must be
been processed. A voided check must be attached to your attached to your application. Money sent through ACH should
application. Money sent through ACH typically reaches reach your bank in two business days. There is no fee for
Gartmore Funds from your bank in two business days. There is this service. (The authorization will be in effect unless
no fee for this service. (The authorization will be in you give the Funds written notice of its termination.)
effect unless you give the Funds written notice of its
termination.) ACH IS NOT AN OPTION FOR EXCHANGES.
-----------------------------------------------------------------------------------------------------------------------------
RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans plan administrator regarding transactions. Retirement plans
or their administrators wishing to conduct transactions or their administrators wishing to conduct transactions
should call our toll-free number. Eligible entities or should call our toll-free number. Eligible entities or
individuals wishing to conduct transactions in Institutional individuals wishing to conduct transactions in Institutional
Service Class or Institutional Class shares should call our Service Class or Institutional Class shares should call our
toll-free number. toll-free number.
|
38 | GARTMORE INDEX SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is
calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time)
each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the
securities and other assets owned by a Fund allocated to a particular
class, less the liabilities allocated to that class, by the total number of
outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
GARTMORE INDEX SERIES | 39
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
MINIMUM INVESTMENTS
CLASS A, CLASS B AND CLASS C SHARES To open an account $2,000 (per Fund) To open an IRA account $1,000 (per Fund) Additional investments $100 (per Fund) To start an Automatic Asset Accumulation Plan $1,000 (per Fund) Additional Investments (Automatic Asset Accumulation Plan) $50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- SERVICE CLASS SHARES To open an account $25,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- LOCAL FUND SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- |
Minimum investment requirements do not apply to certain retirement plans, fee-based programs or omnibus accounts. If you purchase shares through an intermediary, different minimum account requirements may apply. The Distributor reserves the right to waive the investment minimums under certain circumstances.
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker- dealer or financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are
still permitted for mailing) and
o Social Security number, taxpayer identification number or other
identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross- referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities. Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts),
you are generally subject to a $5 quarterly fee. Shares from your account
are redeemed each quarter to cover the fee, which is returned to the Fund
to offset small account expenses. Under some circumstances, each Fund may
waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your
account if a redemption of shares brings the value of your account below
$2,000 ($1,000 for IRA accounts). In such cases, you will be notified and
given 60 days to purchase additional shares before the account is closed.
40 | GARTMORE INDEX SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment
requirement and
o you purchase the same class of shares. For example, you may exchange
between Class A shares of any Gartmore Fund, but may not exchange between
Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales
charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem
those shares within 18 months of the original purchase, the CDSC applicable
to the original purchase is charged.
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund).
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a
minimum amount of $50. Complete the appropriate section of the Mutual Fund
Application for New Accounts or contact your financial intermediary or the
Funds' transfer agent. Your account value must meet the minimum initial
investment amount at the time the program is established. This program may
reduce, and eventually deplete, your account. Generally, it is not advisable to
continue to purchase Class A or Class C shares subject to a sales charge while
redeeming shares using this program. An automatic withdrawal plan for Class C
shares will be subject to any applicable CDSC. If you own Class B shares, you
will not be charged a CDSC on redemptions if you redeem 12% or less of your
account value in a single year. More information about the waiver of the CDSC
for Class B shares is located in the SAI.
SELLING SHARES
You can sell or, in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or the Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange
Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio
management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
GARTMORE INDEX SERIES | 41
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
MEDALLION SIGNATURE GUARANTEE
A medallion signature guarantee is required for redemptions of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered
shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions
are currently not on your account.
42 | GARTMORE INDEX SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or redemptions and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser, its subadvisers and its agents, monitor selected
trades and flows of money in and out of the Funds in an effort to detect
excessive short-term trading activities. If a shareholder is found to have
engaged in excessive short-term trading, the Funds may, in their discretion, ask
the shareholder to stop such activities or refuse to process purchases or
exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund
has broad authority to take discretionary action against market timers and
against particular trades and uniformly will apply the short-term trading
restrictions to all such trades that the Fund identifies. It also has sole
discretion to:
o restrict purchases or exchanges that the Fund or its agents believe
constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or
its exchange limits.
Each Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These
Gartmore Funds will assess either a redemption fee if you redeem your Fund
shares or an exchange fee if you exchange your Fund shares into another
Gartmore Fund. The short-term trading fees are deducted from the proceeds
of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares-Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
GARTMORE INDEX SERIES | 43
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund)
following the death or disability of a shareholder. The disability,
determination of disability and subsequent redemption must have occurred
during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional
IRAs after age 70-1/2 and other required distributions from retirement
accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an
automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with
a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on
underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to
impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund for less than the minimum holding period listed below:
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and
Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
44 | GARTMORE INDEX SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gains distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains
tax rates;
o distributions of short-term capital gains are federally taxable at
applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term
capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified
dividend income eligible for long-term capital gains tax rates, provided
that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be
eligible for the corporate dividend-received deduction, subject to certain
limitations and
o distributions declared in December to shareholders of record in such month,
but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gains distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
GARTMORE INDEX SERIES | 45
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
TAX STATUS FOR RETIREMENT PLANS AND
OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gains distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
46 | GARTMORE INDEX SERIES
SECTION 6 GARTMORE BOND INDEX FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31 or, if a Fund or a class has not been inoperation for five years, for the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that aninvestor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited byPricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $10.93 0.47 0.05 0.52
Year Ended October 31, 2003 $10.96 0.34 0.09 0.43
Year Ended October 31, 2004 $10.98 0.36 0.17 0.53
Year Ended October 31, 2005 $11.13 0.41 (0.34) 0.07
Year Ended October 31, 2006 $10.77 0.44 0.04 0.48
---------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $10.93 0.41 0.05 0.46
Year Ended October 31, 2003 $10.96 0.29 0.07 0.36
Year Ended October 31, 2004 $10.98 0.30 0.17 0.47
Year Ended October 31, 2005 $11.13 0.33 (0.33) -
Year Ended October 31, 2006 $10.77 0.38 0.04 0.42
---------------------------------------------------------------------------
CLASS C SHARES
Period Ended
October 31, 2006 (f) $10.68 0.23 0.13 0.36
---------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $10.92 0.52 0.05 0.57
Year Ended October 31, 2003 $10.95 0.39 0.09 0.48
Year Ended October 31, 2004 $10.98 0.41 0.17 0.58
Year Ended October 31, 2005 $11.13 0.45 (0.34) 0.11
Year Ended October 31, 2006 $10.77 0.48 0.03 0.51
---------------------------------------------------------------------------
|
DISTRIBUTIONS
----------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END
INCOME GAINS DISTRIBUTIONS OF PERIOD
----------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.48) (0.01) (0.49) $10.96
Year Ended October 31, 2003 (0.40) (0.01) (0.41) $10.98
Year Ended October 31, 2004 (0.38) - (0.38) $11.13
Year Ended October 31, 2005 (0.42) (0.01) (0.43) $10.77
Year Ended October 31, 2006 (0.44) - (0.44) $10.81
----------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.42) (0.01) (0.43) $10.96
Year Ended October 31, 2003 (0.33) (0.01) (0.34) $10.98
Year Ended October 31, 2004 (0.32) - (0.32) $11.13
Year Ended October 31, 2005 (0.35) (0.01) (0.36) $10.77
Year Ended October 31, 2006 (0.38) - (0.38) $10.81
-----------------------------------------------------------------------------
CLASS C SHARES
Period Ended
October 31, 2006 (f) (0.23) - (0.23) $10.81
----------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (0.53) (0.01) (0.54) $10.95
Year Ended October 31, 2003 (0.44) (0.01) (0.45) $10.98
Year Ended October 31, 2004 (0.43) - (0.43) $11.13
Year Ended October 31, 2005 (0.46) (0.01) (0.47) $10.77
Year Ended October 31, 2006 (0.48) - (0.48) $10.80
----------------------------------------------------------------------------
|
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
RETURN(A) (000S) NET ASSETS NET ASSETS ASSETS(B) ASSETS(B) TURNOVER(C)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 5.01% $ 38,447 0.72% 4.29% 0.84% 4.17% 124.75%
Year Ended October 31, 2003 3.96% $ 42,292 0.71% 3.07% 0.82% 2.96% 139.66%
Year Ended October 31, 2004 4.94% $ 40,757 0.71% 3.25% 0.77% 3.19% 151.56%
Year Ended October 31, 2005 0.56% $ 42,126 0.71% 3.74% 0.77% 3.69% 153.31%
Year Ended October 31, 2006 4.59% $ 44,444 0.71% 4.15% 0.75% 4.11% 113.91%
--------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 4.38% $ 28 1.33% 3.69% 1.44% 3.58% 124.75%
Year Ended October 31, 2003 3.34% $ 256 1.31% 2.10% 1.41% 2.00% 139.66%
Year Ended October 31, 2004 4.32% $ 457 1.31% 2.70% 1.37% 2.65% 151.56%
Year Ended October 31, 2005 (0.04%) $ 218 1.31% 3.18% 1.37% 3.09% 153.31%
Year Ended October 31, 2006 3.96% $ 181 1.32% 3.56% 1.36% 3.52% 113.91%
--------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended
October 31, 2006 (f) 3.43%(d) $ 5 1.31%(e) 3.73%(e) 1.38%(e) 3.66%(e) 113.91%
--------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 5.46% $ 185,141 0.31% 4.67% 0.45% 4.53% 124.75%
Year Ended October 31, 2003 4.47% $ 481,326 0.31% 3.34% 0.42% 3.23% 139.66%
Year Ended October 31, 2004 5.36% $ 952,042 0.31% 3.69% 0.37% 3.63% 151.56%
Year Ended October 31, 2005 0.97% $1,470,683 0.31% 4.14% 0.37% 4.09% 153.31%
Year Ended October 31, 2006 4.91% $2,036,325 0.32% 4.57% 0.36% 4.53% 113.91%
--------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such
waivers/reimbursements had not occurred, the ratios would have been as
indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares.
(d) Not annualized.
(e) Annualized
(f) For the period from March 29, 2006 (commencement of operations) through
October 31, 2006.
GARTMORE INDEX SERIES | 47
SECTION 6 GARTMORE INTERNATIONAL INDEX FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
----------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
----------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $6.37 0.08 (1.06) (0.98)
Year Ended October 31, 2003 $5.31 0.09 1.25 1.34
Year Ended October 31, 2004 $6.55 0.10 1.07 1.17
Year Ended October 31, 2005 $7.63 0.16 1.18 1.34
Year Ended October 31, 2006 $8.69 0.16 2.11 2.27
----------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $6.32 0.03 (1.04) (1.01)
Year Ended October 31, 2003 $5.26 0.06 1.24 1.30
Year Ended October 31, 2004 $6.48 0.06 1.05 1.11
Year Ended October 31, 2005 $7.54 0.08 1.19 1.27
Year Ended October 31, 2006 $8.57 0.13 2.05 2.18
----------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005(d) $8.27 0.09 0.19 0.28
Year Ended October 31, 2006 $8.44 0.11 2.04 2.15
----------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $6.37 0.09 (1.04) (0.95)
Year Ended October 31, 2003 $5.32 0.11 1.25 1.36
Year Ended October 31, 2004 $6.56 0.12 1.08 1.20
Year Ended October 31, 2005 $7.64 0.18 1.19 1.37
Year Ended October 31, 2006 $8.70 0.22 2.09 2.31
----------------------------------------------------------------------------
|
DISTRIBUTIONS
----------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END
INCOME GAINS DISTRIBUTIONS OF PERIOD
----------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.08) - (0.08) $ 5.31
Year Ended October 31, 2003 (0.10) - (0.10) $ 6.55
Year Ended October 31, 2004 (0.09) -(g) (0.09) $ 7.63
Year Ended October 31, 2005 (0.20) (0.08) (0.28) $ 8.69
Year Ended October 31, 2006 (0.12) (0.25) (0.37) $10.59
----------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.05) - (0.05) $ 5.26
Year Ended October 31, 2003 (0.08) - (0.08) $ 6.48
Year Ended October 31, 2004 (0.05) -(g) (0.05) $ 7.54
Year Ended October 31, 2005 (0.16) (0.08) (0.24) $ 8.57
Year Ended October 31, 2006 (0.08) (0.25) (0.33) $10.42
----------------------------------------------------------------------------
CLASS C SHARES
Period Ended
October 31, 2005(d) (0.11) - (0.11) $ 8.44
Year Ended October 31, 2006 (0.09) (0.25) (0.34) $10.25
----------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (0.10) - (0.10) $ 5.32
Year Ended October 31, 2003 (0.12) - (0.12) $ 6.56
Year Ended October 31, 2004 (0.12) -(g) (0.12) $ 7.64
Year Ended October 31, 2005 (0.23) (0.08) (0.31) $ 8.70
Year Ended October 31, 2006 (0.15) (0.25) (0.40) $10.61
----------------------------------------------------------------------------
|
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
RETURN(a) (000S) NET ASSETS NET ASSETS ASSETS(b) ASSETS(b) TURNOVER(c)
------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (15.65%) $ 12,549 0.79% 1.15% 0.96% 0.98% 32.45%
Year Ended October 31, 2003 25.51% $ 16,404 0.75% 1.71% 0.88% 1.58% 7.71%
Year Ended October 31, 2004 18.01% $ 34,183 0.76% 1.57% 0.82% 1.51% 7.62%
Year Ended October 31, 2005 17.83% $ 40,565 0.76% 1.81% 0.83% 1.75% 12.24%
Year Ended October 31, 2006 26.89% $ 103,403 0.76% 1.95% 0.80% 1.91% 8.66%
------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (16.12%) $ 80 1.39% 0.64% 1.72% 0.31% 32.45%
Year Ended October 31, 2003 24.88% $ 105 1.36% 1.03% 1.48% 0.90% 7.71%
Year Ended October 31, 2004 17.21% $ 159 1.36% 0.98% 1.42% 0.92% 7.62%
Year Ended October 31, 2005 17.17% $ 396 1.36% 1.14% 1.43% 1.07% 12.24%
Year Ended October 31, 2006 25.98% $ 605 1.37% 1.41% 1.41% 1.37% 8.66%
------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2005(d)
3.63%(e) $ 152 1.36%(f) 1.57%(f) 1.43%(f) 1.50%(f) 12.24%
Year Ended October 31, 2006 26.06% $ 639 1.37% 1.36% 1.41% 1.33% 8.66%
------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (15.20%) $ 119,502 0.36% 1.66% 0.56% 1.46% 32.45%
Year Ended October 31, 2003 25.90% $ 359,705 0.36% 1.99% 0.48% 1.87% 7.71%
Year Ended October 31, 2004 18.43% $ 855,050 0.36% 1.99% 0.42% 1.93% 7.62%
Year Ended October 31, 2005 18.26% $1,320,858 0.36% 2.17% 0.43% 2.10% 12.24%
Year Ended October 31, 2006 27.32% $1,900,802 0.37% 2.34% 0.41% 2.30% 8.66%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such
waivers/reimbursements had not occurred, the ratios would have been as
indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares.
(d) For period from February 14, 2005 (commencement of operations) through
October 31, 2005.
(e) Not annualized.
(f) Annualized.
(g) The amount is less than $0.005.
48 | GARTMORE INDEX SERIES
SECTION 6 GARTMORE MID CAP MARKET INDEX FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-----------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9.79 0.04 (0.59) (0.55)
Year Ended October 31, 2003 $ 9.19 0.04 2.68 2.72
Year Ended October 31, 2004 $11.87 0.05 1.13 1.18
Year Ended October 31, 2005 $12.89 0.12 2.04 2.16
Year Ended October 31, 2006 $14.68 0.17 1.63 1.80
-----------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 9.74 (0.01) (0.58) (0.59)
Year Ended October 31, 2003 $ 9.13 (0.02) 2.66 2.64
Year Ended October 31, 2004 $11.77 (0.02) 1.12 1.10
Year Ended October 31, 2005 $12.75 0.03 2.01 2.04
Year Ended October 31, 2006 $14.50 0.07 1.63 1.70
-----------------------------------------------------------------------------
CLASS C SHARES
Period Ended
October 31, 2003 (d) $11.43 - 0.33 0.33
Year Ended October 31, 2004 $11.76 (0.02) 1.12 1.10
Year Ended October 31, 2005 $12.74 0.02 2.01 2.03
Year Ended October 31, 2006 $14.46 0.07 1.62 1.69
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $ 9.84 0.08 (0.58) (0.50)
Year Ended October 31, 2003 $ 9.25 0.08 2.70 2.78
Year Ended October 31, 2004 $11.95 0.11 1.13 1.24
Year Ended October 31, 2005 $12.96 0.17 2.06 2.23
Year Ended October 31, 2006 $14.77 0.22 1.65 1.87
-----------------------------------------------------------------------------
|
DISTRIBUTIONS
-------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END
INCOME GAINS DISTRIBUTIONS OF PERIOD
-------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.05) - (0.05) $ 9.19
Year Ended October 31, 2003 (0.04) - (0.04) $11.87
Year Ended October 31, 2004 (0.04) (0.12) (0.16) $12.89
Year Ended October 31, 2005 (0.11) (0.26) (0.37) $14.68
Year Ended October 31, 2006 (0.18) (0.66) (0.84) $15.64
-------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.02) - (0.02) $ 9.13
Year Ended October 31, 2003 - - - $11.77
Year Ended October 31, 2004 - (0.12) (0.12) $12.75
Year Ended October 31, 2005 (0.03) (0.26) (0.29) $14.50
Year Ended October 31, 2006 (0.09) (0.66) (0.75) $15.45
-------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d)
- - - $11.76
Year Ended October 31, 2004 - (0.12) (0.12) $12.74
Year Ended October 31, 2005 (0.05) (0.26) (0.31) $14.46
Year Ended October 31, 2006 (0.11) (0.66) (0.77) $15.38
-------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (0.09) - (0.09) $ 9.25
Year Ended October 31, 2003 (0.08) - (0.08) $11.95
Year Ended October 31, 2004 (0.11) (0.12) (0.23) $12.96
Year Ended October 31, 2005 (0.16) (0.26) (0.42) $14.77
Year Ended October 31, 2006 (0.23) (0.66) (0.89) $15.75
-------------------------------------------------------------------------------
|
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
RETURN(A) (000S) NET ASSETS NET ASSETS ASSETS(B) ASSETS(B) TURNOVER(C)
------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (5.67%) $ 19,002 0.73% 0.42% 0.83% 0.32% 15.82%
Year Ended October 31, 2003 29.72% $ 38,693 0.71% 0.48% 0.82% 0.37% 8.26%
Year Ended October 31, 2004 10.07% $ 65,059 0.70% 0.50% 0.77% 0.44% 15.75%
Year Ended October 31, 2005 16.94% $ 150,305 0.70% 0.90% 0.77% 0.84% 18.44%
Year Ended October 31, 2006 12.57% $ 192,274 0.71% 1.09% 0.76% 1.05% 15.59%
-------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (6.13%) $ 86 1.32% (0.16%) 1.44% (0.28%) 15.82%
Year Ended October 31, 2003 28.96% $ 295 1.31% (0.13%) 1.42% (0.25%) 8.26%
Year Ended October 31, 2004 9.44% $ 657 1.31% (0.10%) 1.37% (0.17%) 15.75%
Year Ended October 31, 2005 16.15% $ 884 1.31% 0.27% 1.38% 0.21% 18.44%
Year Ended October 31, 2006 11.98% $ 935 1.32% 0.49% 1.37% 0.43% 15.59%
-------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d)
2.89%(e) $ 21 1.31%(f) 0.16%(f) 1.71%(f) (0.24%)(f) 8.26%
Year Ended October 31, 2004 9.48% $ 26 1.31% (0.10%) 1.38% (0.17%) 15.75%
Year Ended October 31, 2005 16.13% $ 225 1.31% 0.28% 1.39% 0.21% 18.44%
Year Ended October 31, 2006 11.96% $ 794 1.32% 0.42% 1.37% 0.38% 15.59%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (5.19%) $ 84,128 0.31% 0.84% 0.44% 0.71% 15.82%
Year Ended October 31, 2003 30.21% $ 247,960 0.31% 0.87% 0.42% 0.76% 8.26%
Year Ended October 31, 2004 10.47% $ 530,191 0.31% 0.89% 0.37% 0.83% 15.75%
Year Ended October 31, 2005 17.41% $ 857,475 0.31% 1.27% 0.38% 1.21% 18.44%
Year Ended October 31, 2006 13.06% $1,108,039 0.32% 1.47% 0.37% 1.43% 15.59%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such
waivers/reimbursements had not occurred, the ratios would have been as
indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares.
(d) For period from October 22, 2003 (commencement of operations) through
October 31, 2003.
(e) Not annualized.
(f) Annualized.
GARTMORE INDEX SERIES | 49
SECTION 6 GARTMORE S&P 500 INDEX FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-----------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 9.12 0.09 (1.50) (1.41)
Year Ended October 31, 2003 $ 7.62 0.10 1.41 1.51
Year Ended October 31, 2004 $ 9.04 0.11 0.70 0.81
Year Ended October 31, 2005 $ 9.74 0.15 0.64 0.79
Year Ended October 31, 2006 $10.36 0.16 1.47 1.63
-----------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 9.09 0.03 (1.50) (1.47)
Year Ended October 31, 2003 $ 7.59 0.04 1.41 1.45
Year Ended October 31, 2004 $ 9.00 0.05 0.69 0.74
Year Ended October 31, 2005 $ 9.70 0.09 0.63 0.72
Year Ended October 31, 2006 $10.33 0.08 1.46 1.54
-----------------------------------------------------------------------------
CLASS C SHARES
Period Ended
October 31, 2003 (d) $ 8.83 - 0.18 0.18
Year Ended October 31, 2004 $ 9.01 0.05 0.67 0.72
Year Ended October 31, 2005 $ 9.67 0.08 0.64 0.72
Year Ended October 31, 2006 $10.28 0.08 1.46 1.54
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $ 9.15 0.11 (1.51) (1.40)
Year Ended October 31, 2003 $ 7.64 0.11 1.43 1.54
Year Ended October 31, 2004 $ 9.07 0.13 0.70 0.83
Year Ended October 31, 2005 $ 9.77 0.19 0.64 0.83
Year Ended October 31, 2006 $10.41 0.19 1.47 1.66
-----------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 9.11 0.08 (1.50) (1.42)
Year Ended October 31, 2003 $ 7.61 0.09 1.41 1.50
Year Ended October 31, 2004 $ 9.03 0.11 0.69 0.80
Year Ended October 31, 2005 $ 9.73 0.16 0.62 0.78
Year Ended October 31, 2006 $10.36 0.15 1.46 1.61
-----------------------------------------------------------------------------
|
DISTRIBUTIONS
-------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END
INCOME GAINS DISTRIBUTIONS OF PERIOD
-------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (0.09) - (0.09) $ 7.62
Year Ended October 31, 2003 (0.09) - (0.09) $ 9.04
Year Ended October 31, 2004 (0.11) - (0.11) $ 9.74
Year Ended October 31, 2005 (0.17) - (0.17) $10.36
Year Ended October 31, 2006 (0.16) (0.08) (0.24) $11.75
-------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (0.03) - (0.03) $ 7.59
Year Ended October 31, 2003 (0.04) - (0.04) $ 9.00
Year Ended October 31, 2004 (0.04) - (0.04) $ 9.70
Year Ended October 31, 2005 (0.09) - (0.09) $10.33
Year Ended October 31, 2006 (0.08) (0.08) (0.16) $11.71
-------------------------------------------------------------------------------
CLASS C SHARES
Period Ended
October 31, 2003 (d) - - - $ 9.01
Year Ended October 31, 2004 (0.06) - (0.06) $ 9.67
Year Ended October 31, 2005 (0.11) - (0.11) $10.28
Year Ended October 31, 2006 (0.09) (0.08) (0.17) $11.65
-------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (0.11) - (0.11) $ 7.64
Year Ended October 31, 2003 (0.11) - (0.11) $ 9.07
Year Ended October 31, 2004 (0.13) - (0.13) $ 9.77
Year Ended October 31, 2005 (0.19) - (0.19) $10.41
Year Ended October 31, 2006 (0.19) (0.08) (0.27) $11.80
-------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (0.08) - (0.08) $ 7.61
Year Ended October 31, 2003 (0.08) - (0.08) $ 9.03
Year Ended October 31, 2004 (0.10) - (0.10) $ 9.73
Year Ended October 31, 2005 (0.15) - (0.15) $10.36
Year Ended October 31, 2006 (0.14) (0.08) (0.22) $11.75
-------------------------------------------------------------------------------
|
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
RETURN(a) (000S) NET ASSETS NET ASSETS ASSETS(b) ASSETS(b) TURNOVER(c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 (15.62%) $ 3,942 0.52% 1.06% 0.61% 0.97% 3.06%
Year Ended October 31, 2003 20.03% $ 5,795 0.48% 1.28% 0.56% 1.21% 1.30%
Year Ended October 31, 2004 8.99% $ 7,822 0.50% 1.18% 0.54% 1.13% 1.71%
Year Ended October 31, 2005 8.11% $ 24,805 0.50% 1.49% 0.56% 1.43% 5.28%
Year Ended October 31, 2006 15.90% $ 42,670 0.49% 1.46% 0.52% 1.43% 2.63%
--------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 (16.24%) $ 2,423 1.23% 0.35% 1.39% 0.19% 3.06%
Year Ended October 31, 2003 19.14% $ 3,713 1.23% 0.54% 1.30% 0.47% 1.30%
Year Ended October 31, 2004 8.23% $ 4,820 1.23% 0.45% 1.27% 0.41% 1.71%
Year Ended October 31, 2005 7.45% $ 5,707 1.23% 0.90% 1.28% 0.86% 5.28%
Year Ended October 31, 2006 15.01% $ 6,296 1.23% 0.75% 1.26% 0.72% 2.63%
--------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (d)
2.04%(e) $ 10 1.23%(f) 0.48%(f) 1.23%(f) 0.48%(f) 1.30%
Year Ended October 31, 2004 8.06% $ 250 1.23% 0.46% 1.27% 0.42% 1.71%
Year Ended October 31, 2005 7.44% $ 831 1.23% 0.71% 1.28% 0.65% 5.28%
Year Ended October 31, 2006 15.06% $ 1,423 1.23% 0.72% 1.26% 0.69% 2.63%
--------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (15.44%) $ 235,333 0.23% 1.37% 0.33% 1.27% 3.06%
Year Ended October 31, 2003 20.39% $ 620,598 0.23% 1.52% 0.30% 1.45% 1.30%
Year Ended October 31, 2004 8.86% $1,247,061 0.23% 1.45% 0.27% 1.41% 1.71%
Year Ended October 31, 2005 8.55% $2,007,290 0.23% 1.86% 0.28% 1.81% 5.28%
Year Ended October 31, 2006 16.12% $2,689,368 0.23% 1.73% 0.26% 1.71% 2.63%
--------------------------------------------------------------------------------------------------------------------------------
SERVICE CLASS SHARES
Year Ended October 31, 2002 (15.73%) $ 266,515 0.63% 0.94% 0.72% 0.85% 3.06%
Year Ended October 31, 2003 19.89% $ 413,554 0.63% 1.14% 0.70% 1.06% 1.30%
Year Ended October 31, 2004 9.24% $ 523,127 0.63% 1.05% 0.67% 1.01% 1.71%
Year Ended October 31, 2005 8.06% $ 578,102 0.63% 1.51% 0.67% 1.47% 5.28%
Year Ended October 31, 2006 15.74% $ 628,021 0.63% 1.35% 0.66% 1.32% 2.63%
--------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such
waivers/reimbursements had not occurred, the ratios would have been as
indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares.
(d) For period from february 14, 2005 (commencement of operations) through
October 31, 2005.
(e) Not annualized.
(f) Annualized.
(g) The amount is less then $0.005.
50 | GARTMORE INDEX SERIES
SECTION 6 GARTMORE S&P 500 INDEX FUND FINANCIAL HIGHLIGHTS (CONT.)
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-----------------------------------------------------------------------------
INSTITUTIONAL SERVICE
CLASS SHARES
Year Ended October 31, 2002 $ 9.14 0.09 (1.50) (1.41)
Year Ended October 31, 2003 $ 7.64 0.10 1.42 1.52
Year Ended October 31, 2004 $ 9.07 0.12 0.69 0.81
Year Ended October 31, 2005 $ 9.77 0.18 0.62 0.80
Year Ended October 31, 2006 $10.40 0.17 1.46 1.63
-----------------------------------------------------------------------------
LOCAL FUND SHARES
Year Ended October 31, 2002 $ 9.17 0.11 (1.52) (1.41)
Year Ended October 31, 2003 $ 7.66 0.12 1.42 1.54
Year Ended October 31, 2004 $ 9.09 0.14 0.69 0.83
Year Ended October 31, 2005 $ 9.79 0.20 0.63 0.83
Year Ended October 31, 2006 $10.43 0.19 1.47 1.66
-----------------------------------------------------------------------------
|
DISTRIBUTIONS
-----------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END
INCOME GAINS DISTRIBUTIONS OF PERIOD
-----------------------------------------------------------------------------
INSTITUTIONAL SERVICE
CLASS SHARES
Year Ended October 31, 2002 (0.09) - (0.09) $ 7.64
Year Ended October 31, 2003 (0.09) - (0.09) $ 9.07
Year Ended October 31, 2004 (0.11) - (0.11) $ 9.77
Year Ended October 31, 2005 (0.17) - (0.17) $10.40
Year Ended October 31, 2006 (0.16) (0.08) (0.24) $11.79
-----------------------------------------------------------------------------
LOCAL FUND SHARES
Year Ended October 31, 2002 (0.10) - (0.10) $ 7.66
Year Ended October 31, 2003 (0.11) - (0.11) $ 9.09
Year Ended October 31, 2004 (0.13) - (0.13) $ 9.79
Year Ended October 31, 2005 (0.19) - (0.19) $10.43
Year Ended October 31, 2006 (0.18) (0.08) (0.26) $11.83
-----------------------------------------------------------------------------
|
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
RETURN(A) (000S) NET ASSETS NET ASSETS ASSETS(B) ASSETS(B) TURNOVER(C)
------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE
CLASS SHARES
Year Ended October 31, 2002 (15.56%) $ 41,498 0.48% 1.09% 0.57% 1.00% 3.06%
Year Ended October 31, 2003 20.11% $ 55,197 0.48% 1.29% 0.55% 1.21% 1.30%
Year Ended October 31, 2004 9.14% $ 69,569 0.48% 1.21% 0.52% 1.16% 1.71%
Year Ended October 31, 2005 8.29% $ 69,996 0.48% 1.68% 0.52% 1.63% 5.28%
Year Ended October 31, 2006 15.85% $ 82,443 0.48% 1.49% 0.51% 1.47% 2.63%
-------------------------------------------------------------------------------------------------------------------------------
LOCAL FUND SHARES
Year Ended October 31, 2002 (15.47%) $ 81 0.31% 1.25% 0.39% 1.17% 3.06%
Year Ended October 31, 2003 20.26% $ 97 0.30% 1.47% 0.37% 1.40% 1.30%
Year Ended October 31, 2004 8.85% $ 106 0.30% 1.38% 0.34% 1.34% 1.71%
Year Ended October 31, 2005 8.45% $ 115 0.30% 1.85% 0.35% 1.80% 5.28%
Year Ended October 31, 2006 16.10% $ 134 0.30% 1.67% 0.33% 1.65% 2.63%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such
waivers/reimbursements had not occurred, the ratios would have been as
indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares.
(d) For period from October 22, 2003 (commencement of operations) through
October 31, 2003.
(e) Not annualized.
(f) Annualized.
GARTMORE INDEX SERIES | 51
SECTION 6 GARTMORE SMALL CAP INDEX FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
INVESTMENT ACTIVITIES
-----------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-----------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 8.34 0.05 (1.07) (1.02)
Year Ended October 31, 2003 $ 7.27 0.05 2.98 3.03
Year Ended October 31, 2004 $10.25 0.06 1.06 1.12
Year Ended October 31, 2005 $11.15 0.10 1.20 1.30
Year Ended October 31, 2006 $11.90 0.15 2.06 2.21
-----------------------------------------------------------------------------
CLASS B SHARES
Period Ended
October 31, 2002 (d) $ 8.84 0.03 (1.59) (1.56)
Year Ended October 31, 2003 $ 7.25 - 2.97 2.97
Year Ended October 31, 2004 $10.21 (0.01) 1.05 1.04
Year Ended October 31, 2005 $11.08 0.03 1.19 1.22
Year Ended October 31, 2006 $11.82 0.08 2.02 2.10
-----------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (e)
$ 9.91 - 0.29 0.29
Year Ended October 31, 2004 $10.20 - 1.06 1.06
Year Ended October 31, 2005 $11.08 0.03 1.19 1.22
Year Ended October 31, 2006 $11.80 0.06 2.05 2.11
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $ 8.38 0.08 (1.06) (0.98)
Year Ended October 31, 2003 $ 7.32 0.08 3.00 3.08
Year Ended October 31, 2004 $10.32 0.10 1.09 1.19
Year Ended October 31, 2005 $11.24 0.15 1.21 1.36
Year Ended October 31, 2006 $12.00 0.20 2.07 2.27
-----------------------------------------------------------------------------
|
DISTRIBUTIONS
-----------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END
INCOME GAINS DISTRIBUTIONS OF PERIOD
-----------------------------------------------------------------------------
CLASS A SHARESY
Year Ended October 31, 2002 (0.05) - (0.05) $ 7.27
Year Ended October 31, 2003 (0.05) - (0.05) $10.25
Year Ended October 31, 2004 (0.05) (0.17) (0.22) $11.15
Year Ended October 31, 2005 (0.10) (0.45) (0.55) $11.90
Year Ended October 31, 2006 (0.15) (0.49) (0.64) $13.47
-----------------------------------------------------------------------------
CLASS B SHARES
Period Ended
October 31, 2002 (d) (0.03) - (0.03) $ 7.25
Year Ended October 31, 2003 (0.01) - (0.01) $10.21
Year Ended October 31, 2004 - (0.17) (0.17) $11.08
Year Ended October 31, 2005 (0.03) (0.45) (0.48) $11.82
Year Ended October 31, 2006 (0.07) (0.49) (0.56) $13.36
-----------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (e)
- - - $10.20
Year Ended October 31, 2004 (0.01) (0.17) (0.18) $11.08
Year Ended October 31, 2005 (0.05) (0.45) (0.50) $11.80
Year Ended October 31, 2006 (0.09) (0.49) (0.58) $13.33
-----------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (0.08) - (0.08) $ 7.32
Year Ended October 31, 2003 (0.08) - (0.08) $10.32
Year Ended October 31, 2004 (0.10) (0.17) (0.27) $11.24
Year Ended October 31, 2005 (0.15) (0.45) (0.60) $12.00
Year Ended October 31, 2006 (0.19) (0.49) (0.68) $13.59
-----------------------------------------------------------------------------
|
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
RETURN(A) (000S) NET ASSETS NET ASSETS ASSETS(B) ASSETS(B) TURNOVER(C)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARESY
Year Ended October 31, 2002 (12.29%) $ 11,079 0.71% 0.71% 0.97% 0.45% 34.77%
Year Ended October 31, 2003 41.89% $ 42,343 0.69% 0.61% 0.83% 0.47% 25.63%
Year Ended October 31, 2004 11.08% $ 62,688 0.69% 0.56% 0.77% 0.48% 24.10%
Year Ended October 31, 2005 11.67% $ 65,751 0.69% 0.90% 0.77% 0.82% 24.14%
Year Ended October 31, 2006 19.14% $114,281 0.70% 1.21% 0.74% 1.17% 31.51%
--------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2002 (d)
(17.68%)(f) $ 89 1.29%(g) 0.15%(g) 1.55%(g) (0.11%)(g) 34.77%
Year Ended October 31, 2003 40.98% $ 249 1.29% 0.04% 1.44% (0.11%) 25.63%
Year Ended October 31, 2004 10.28% $ 424 1.29% (0.04%) 1.37% (0.12%) 24.10%
Year Ended October 31, 2005 10.98% $ 444 1.29% 0.28% 1.37% 0.21% 24.14%
Year Ended October 31, 2006 18.38% $ 482 1.30% 0.62% 1.35% 0.57% 31.51%
--------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2003 (e)
2.93%(f) $ 21 1.29%(g) 0.07%(g) 1.38%(g) (0.02%)(g) 25.63%
Year Ended October 31, 2004 10.48% $ 39 1.29% (0.04%) 1.37% (0.12%) 24.10%
Year Ended October 31, 2005 10.99% $ 200 1.29% 0.23% 1.37% 0.16% 24.14%
Year Ended October 31, 2006 18.40% $ 534 1.30% 0.53% 1.35% 0.49% 31.51%
--------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (11.80%) $ 33,247 0.29% 1.14% 0.58% 0.85% 34.77%
Year Ended October 31, 2003 42.49% $ 99,904 0.29% 1.04% 0.44% 0.89% 25.63%
Year Ended October 31, 2004 11.51% $210,322 0.29% 0.97% 0.37% 0.88% 24.10%
Year Ended October 31, 2005 12.11% $348,509 0.29% 1.28% 0.37% 1.21% 24.14%
Year Ended October 31, 2006 19.60% $518,239 0.30% 1.61% 0.35% 1.57% 31.51%
--------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such
waivers/reimbursements had not occurred, the ratios would have been as
indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing among the classes of shares.
(d) For period from November 29, 2001 (commencement of operations) through
October 31, 2002.
(e) For period from October 22, 2003 (commencement of operations) through
October 31, 2003.
(f) Not annualized.
(g) Annualized.
52 | GARTMORE INDEX SERIES
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents - which may be obtained free of charge - contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this
Prospectus)
o Annual Reports (which contain discussions of the market conditions and
investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800848- 0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are
available 8 a.m. -9 p.m. Eastern Time, Monday through Friday.
Call after 7 p.m. Eastern Time for closing share prices. Also, visit
the Gartmore Funds' website at www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE
COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC:
o on the SEC's EDGAR database via the Internet at www.sec.gov;
o by electronic request to publicinfo@sec.gov;
o in person at the SEC's Public Reference Room in Washington, D.C. (For their
hours of operation, call 202-551-8090) or
o by mail by sending your request to Securities and Exchange Commission
Public Reference Section, Washington, D.C. 20549-0102. (The SEC charges a
fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-IDX 2/07
INTERNATIONAL Series
Gartmore China Opportunities Fund
Gartmore Emerging Markets Fund
Gartmore International Growth Fund
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
FUND AND CLASS TICKER -------------------------------------------------------------------------------- Gartmore China Opportunities Fund Class A GOPAX -------------------------------------------------------------------------------- Gartmore China Opportunities Fund Class B GOPBX -------------------------------------------------------------------------------- Gartmore China Opportunities Fund Class C GOPCX -------------------------------------------------------------------------------- Gartmore China Opportunities Fund Class R GOPRX -------------------------------------------------------------------------------- Gartmore China Opportunities Fund Institutional Class GOPIX -------------------------------------------------------------------------------- Gartmore China Opportunities Fund Institutional Service Class GOPSX -------------------------------------------------------------------------------- Gartmore Emerging Markets Fund Class A GEGAX -------------------------------------------------------------------------------- Gartmore Emerging Markets Fund Class B GEGBX -------------------------------------------------------------------------------- Gartmore Emerging Markets Fund Class C GEGCX -------------------------------------------------------------------------------- Gartmore Emerging Markets Fund Class R GEMRX -------------------------------------------------------------------------------- Gartmore Emerging Markets Fund Institutional Class GEGIX -------------------------------------------------------------------------------- Gartmore Emerging Markets Fund Institutional Service Class GEGSX -------------------------------------------------------------------------------- Gartmore International Growth Fund Class A GIGAX -------------------------------------------------------------------------------- Gartmore International Growth Fund Class B GIGBX -------------------------------------------------------------------------------- Gartmore International Growth Fund Class C GIGCX -------------------------------------------------------------------------------- Gartmore International Growth Fund Class R GIRRX -------------------------------------------------------------------------------- Gartmore International Growth Fund Institutional Class GIGIX -------------------------------------------------------------------------------- Gartmore International Growth Fund Institutional Service Class GIGSX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND PERFORMANCE
Gartmore China Opportunities Fund
Gartmore Emerging Markets Fund
Gartmore International Growth Fund
16 SECTION 2: FUND INFORMATION
Additional Information about Investments,
Investment Techniques and Risks
18 SECTION 3: FUND MANAGEMENT
Investment Adviser and Subadviser
Portfolio Management
Multi-Manager Structure
21 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
33 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and
Other Tax-Deferred Accounts
Backup Withholding
35 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE INTERNATIONAL SERIES | 1
INTERNATIONAL Series
INTRODUCTION TO THE INTERNATIONAL SERIES
THIS PROSPECTUS PROVIDES INFORMATION ABOUT THREE FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
Gartmore China Opportunities Fund
Gartmore Emerging Markets Fund
Gartmore International Growth Fund
THESE FUNDS ARE PRIMARILY INTENDED:
o to help investors seek to grow their capital by pursuing investment opportunities outside the United States.
Since these Funds invest primarily in securities of foreign companies, they may involve substantially higher risks and greater volatility than mutual funds that invest only in U.S. securities. The Funds may not be appropriate for all investors. To decide if one or more of these Funds is appropriate for your investment program, you should consider your personal investment objectives and financial circumstances, the length of time until you need your money, and the amount of risk you are comfortable taking.
The following section summarizes key information about the Funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
Each Fund offers six different share classes--Class A, Class B, Class C, Class R, Institutional Service Class and Institutional Class. An investment in any share class of a Fund represents an investment in the same assets of the Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Funds are set forth in the Fund Summaries.
Each Fund may employ a "multi-manager" structure, which means that Gartmore Mutual Fund Capital Trust (the "Adviser"), as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interest and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE INTERNATIONAL SERIES
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMON STOCK - securities representing shares of ownership of a corporation.
DERIVATIVE - a contract whose value is based on the performance of an underlying financial asset, index or economic measure.
EMERGING MARKET COUNTRIES - developing and low or middle income countries as identified by the International Finance Corporation or the World Bank. Emerging market countries may be found in regions such as Asia, Latin America, Eastern Europe, the Middle East and Africa.
EQUITY-LINKED NOTE - a security whose performance is generally tied to a single stock, a stock index or a basket of stocks.
EQUITY SECURITIES - the securities, including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts, that represent an ownership interest in the issuer.
GROWTH STYLE - a style of investing in equity securities of companies that the Fund's management believes have above-average rates of earnings growth and which therefore may experience above-average increases in stock price.
LARGE-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Standard & Poor's(S&P) 500(R) Index, ranging from $1.4 billion to $446.9 billion as of December 31, 2006.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
MID-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell Midcap(R) Index, ranging from $1.19 billion to $20.34 billion as of January 31, 2007.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
GARTMORE INTERNATIONAL SERIES | 3
SECTION 1 GARTMORE CHINA OPPORTUNITIES FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by companies located in China (including Hong Kong). A company generally is considered to be located in China if, as determined by the Fund's management:
o it is organized under the laws of China or Hong Kong or maintains a principal office there;
o its securities trade principally in China or Hong Kong or
o it derives at least 50% of its revenue or earnings from goods or services sold or produced in China or Hong Kong or has at least 50% of its assets there. The portfolio manager currently believes such companies may be located primarily in Taiwan, Singapore and the United States.
The portfolio manager invests in securities of companies he believes:
o have the potential to deliver unexpected earnings; and
o have prospects for earnings growth that the market has underestimated.
Just as importantly, the portfolio manager attempts to avoid companies whose earnings are likely to fall short of expectations.
The portfolio manager assesses the valuation and growth rates both of a particular company and its market. He conducts proprietary research in order to form an independent perspective that provides a basis for valuing stocks. By comparing his own valuations of individual companies to those of the market, the portfolio manager pinpoints companies whose prospects appear different from the market's consensus.
The Fund may invest without limit in companies of any size, including SMALL-CAP and MID-CAP COMPANIES. The Fund also may invest in EQUITY-LINKED NOTES. For purposes of the Fund's 80% policy described above, equity-linked notes are classified according to their underlying or referenced security or securities. The Fund also may use DERIVATIVES, either as a substitute for taking a position in an underlying asset, to increase returns or as part of a hedging strategy.
The portfolio manager typically sells a security if it appears to no longer offer the potential for unexpected earnings. The portfolio manager specifically monitors:
o earnings revisions and surprises;
o stock price performance and
o any information indicating a change in the industry or franchise assessment of a company.
The Adviser has chosen Gartmore Global Partners as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK - foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
GEOGRAPHIC RISK - concentrating investments in China and Hong Kong subjects the Fund to additional risks, and may make it significantly more volatile than geographically diverse mutual funds.
EMERGING MARKETS RISK - a magnification of the risks that apply to all foreign investments. These risks are greater for securities of companies in emerging markets countries because the countries may have less stable governments, more volatile currencies and less established markets.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Morgan Stanley Capital International (MSCI) Zhong Hua Index(SM), or other funds with similar investment objectives and strategies.
EQUITY-LINKED NOTES RISK - the risk that linked securities may decline in value. Additional risks include exchange rate fluctuations and the credit quality of the issuer that may negatively affect the value of a note.
DERIVATIVES RISK - the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small- and mid-cap companies may be more volatile and less liquid than larger company stocks.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE INTERNATIONAL SERIES
SECTION 1 GARTMORE CHINA OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund.Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEAR ENDED DECEMBER 31)
[BAR CHART]
2005 2006 -------------- 3.52% 67.26% |
BEST QUARTER: 28.28% - 1ST QTR OF 2006
WORST QUARTER: -3.16% - 2ND QTR OF 2006
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR (JUNE 29, 2004)
---------------------------------------------------------------------------------
Class A shares - Before Taxes 57.60% 32.45%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 55.97% 30.10%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions
and Sales of Shares 38.66% 26.98%
---------------------------------------------------------------------------------
Class B shares - Before Taxes 61.04% 33.88%
---------------------------------------------------------------------------------
Class C shares - Before Taxes 65.06% 34.60%
---------------------------------------------------------------------------------
Class R shares - Before Taxes 66.55% 35.18%
---------------------------------------------------------------------------------
Institutional Service Class shares - Before Taxes 67.60% 35.86%
---------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 67.66% 35.99%
---------------------------------------------------------------------------------
MSCI Zhong Hua Index(2) 54.02% 33.95%
---------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 The MSCI Zhong Hua Index is an unmanaged, free float-adjusted, market capitalization-weighted index that measures the performance of stocks in the developed markets of China and Hong Kong. The Index gives one-third of its weightings to China stocks and the remainder to Hong Kong stocks. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE INTERNATIONAL SERIES | 5
SECTION 1 GARTMORE CHINA OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on which share class you select.
-----------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
-----------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
-----------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
-----------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee (as a percentage
of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
-----------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
-----------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed)(7) 1.29% 1.29% 1.29% 1.29% 1.29% 1.29%
-----------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other
distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
-----------------------------------------------------------------------------------------------------------------------------
Other Expenses(8) 0.61% 0.61% 0.61% 0.81% 0.61% 0.61%
-----------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 2.15% 2.90% 2.90% 2.60% 1.90% 1.90%
-----------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense
Reimbursement(9) 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
-----------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES
(AFTER WAIVERS/REIMBURSEMENTS) 2.00% 2.75% 2.75% 2.45% 1.75% 1.75%
-----------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base management fee depending on the assets in the Fund, and (2) upward or downward by up to 0.10% (+/-) depending on the Fund's performance relative to its benchmark, the MSCI Zhong Hua Index. Therefore, the management fee stated in the table above reflects, to the extent applicable, adjustments based on the Fund's assets and the Fund's performance relative to its benchmark as of October 31, 2006. Depending on the performance of the Fund, the management fee at the Fund's current asset level could range from 1.15% at its lowest to 1.35% at its highest. For more information, including a chart that shows the range of the minimum to maximum performance-based fees at all breakpoint levels, see Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.00%, 0.20% and 0.00%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.75% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 2.25% for Class A shares, 2.50% for Class R shares and 2.00% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
6 | GARTMORE INTERNATIONAL SERIES
SECTION 1 GARTMORE CHINA OPPORTUNITIES FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 766 $ 1,196 $ 1,650 $ 2,904
--------------------------------------------------------------------------------
Class B shares 778 1,184 1,715 2,953
--------------------------------------------------------------------------------
Class C shares 378 884 1,515 3,213
--------------------------------------------------------------------------------
Class R shares 248 794 1,367 2,923
--------------------------------------------------------------------------------
Institutional Service Class shares 178 582 1,013 2,210
--------------------------------------------------------------------------------
Institutional Class shares 178 582 1,013 2,210
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 278 $ 884 $ 1,515 $ 2,953
--------------------------------------------------------------------------------
Class C shares 278 884 1,515 3,213
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE INTERNATIONAL SERIES | 7
SECTION 1 GARTMORE EMERGING MARKETS FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital growth by investing primarily in equity securities of companies located in emerging market countries.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by companies that are located in, or that derive a significant portion of their earnings or revenues from, EMERGING MARKET COUNTRIES. The Fund emphasizes companies that the portfolio manager believes have the potential to deliver unexpected earnings.
The portfolio manager looks for emerging markets that he believes offer the potential for strong economic growth, and tries to avoid emerging markets he believes might be politically or economically unstable. The portfolio manager assesses the valuation and growth rates both of a particular company and of the emerging market where the company is located. The portfolio manager conducts proprietary research in order to form an independent perspective that provides a basis for valuing stocks. By comparing his own valuations of individual companies to those of the market, the portfolio manager pinpoints companies whose prospects appear different from the market's consensus.
The Fund also may use DERIVATIVES, such as futures and options, for efficient portfolio management.
The portfolio manager typically sells a security if it appears to no longer offer the potential for unexpected earnings. The portfolio manager specifically monitors:
o earnings revisions and surprises;
o stock price performance and
o any information indicating a change in the industry or franchise assessment of a company.
The Adviser has chosen Gartmore Global Partners as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments-and therefore, the value of Fund shares-may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
EMERGING MARKETS RISK - a magnification of the risks that apply to all foreign investments. These risks are greater for securities of companies in emerging market countries because the countries may have less stable governments, more volatile currencies and less established markets.
SELECTION RISK - the portfolio manager may select securities that underperform the stock market, the Morgan Stanley Capital International (MSCI) Emerging Markets Index(SM), or other funds with similar investment objectives and strategies.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small-and mid-cap companies may be more volatile and less liquid than larger company stocks.
DERIVATIVES RISK - the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset to which the derivative is linked changes in unexpected ways.
If the value of the Fund's investments goes down, you may lose money.
8 | GARTMORE INTERNATIONAL SERIES
SECTION 1 GARTMORE EMERGING MARKETS FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------ -30.43% -20.94% 65.25% 20.34% 31.67% 35.01% |
BEST QUARTER: 32.73% - 4TH QTR OF 2001
WORST QUARTER: -25.64% - 3RD QTR OF 2001
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
(AUG. 30,
1 YEAR 5 YEARS 2000)
---------------------------------------------------------------------------------
Class A shares - Before Taxes 27.26% 25.62% 14.14%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 23.07% 23.83% 12.84%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions
and Sale of Shares 19.84% 22.08% 11.93%
---------------------------------------------------------------------------------
Class B shares - Before Taxes 29.13% 26.13% 14.46%
---------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 33.12% 26.29% 14.70%
---------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 34.75% 26.69% 14.74%
---------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 35.52% 27.54% 15.63%
---------------------------------------------------------------------------------
Institutional Class shares - Before Taxes(4) 35.52% 27.54% 15.63%
---------------------------------------------------------------------------------
MSCI Emerging Markets Index(5) 32.59% 26.97% 15.92%
---------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns before the first offering of Class C shares (3/1/01) and Class R shares (12/30/03) are based on the previous performance of Class B shares. This performance is substantially similar to what Class C and Class R shares would have produced because all classes invest in the same portfolio of securities. Class C performance has been adjusted to reflect applicable sales charges. Returns for Class R shares have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the previous performance of Institutional Service Class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for Institutional Class shares have not been adjusted to reflect its lower expenses.
5 The MSCI Emerging Markets Index is an unmanaged free float-adjusted, market capitalization-weighted index that is designed to measure the performance of the stocks of emerging-country markets. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE INTERNATIONAL SERIES | 9
SECTION 1 GARTMORE EMERGING MARKETS FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on which share class you select.
--------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
FROM YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
--------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
--------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee (as a
percentage of amount redeemed or
exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
--------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the
Fund's investments professionally
managed)(7) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
--------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1)
Fees (paid from Fund assets to cover
the cost of sales, promotions and
other distribution activities, as
well as certain shareholder
servicing costs) 0.25% 1.00% 1.00% 0.50% None None
--------------------------------------------------------------------------------------------------------------------------
Other Expenses(8) 0.40% 0.31% 0.31% 0.51% 0.34% 0.31%
--------------------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES(9) 1.65% 2.31% 2.31% 2.01% 1.34% 1.31%
--------------------------------------------------------------------------------------------------------------------------
|
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base
management fee depending on the assets in the Fund, and (2) upward or
downward by up to 0.10% (+/-) depending on the Fund's performance relative
to its benchmark, the MSCI Emerging Markets Index. Therefore, the
management fee stated in the table above reflects, to the extent
applicable, adjustments based on the Fund's assets and the Fund's
performance relative to its benchmark as of October 31, 2006. Depending on
the performance of the Fund, the management fee at the Fund's current
asset level could range from 0.95% at its lowest to 1.15% at its highest.
For more information, including a chart that shows the range of the
minimum to maximum performance-based fees at all breakpoint levels, see
Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.09%, 0.20% and 0.03% respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.55% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 2.05% for Class A shares, 2.30% for Class R shares and 1.80% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses. Currently, all share classes are operating below the expense limit.
10 | GARTMORE INTERNATIONAL SERIES
SECTION 1 GARTMORE EMERGING MARKETS FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
-------------------------------------------------------------------------------
Class A shares* $ 733 $ 1,065 $ 1,420 $ 2,417
-------------------------------------------------------------------------------
Class B shares 734 1,021 1,435 2,404
-------------------------------------------------------------------------------
Class C shares 334 721 1,235 2,646
-------------------------------------------------------------------------------
Class R shares 204 630 1,083 2,338
-------------------------------------------------------------------------------
Institutional Service Class shares 136 425 734 1,613
-------------------------------------------------------------------------------
Institutional Class shares 133 415 718 1,579
-------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class B shares $ 234 $ 721 $ 1,235 $ 2,404
-------------------------------------------------------------------------------
Class C shares 234 721 1,235 2,646
-------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE INTERNATIONAL SERIES | 11
SECTION 1 GARTMORE INTERNATIONAL GROWTH FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital growth by investing primarily in equity securities of companies located in Europe, Australasia, the Far East and other regions, including developing countries.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by companies that are located in, or that derive a significant portion of their earnings or revenues from, a number of countries around the world other than the United States. Some of these countries may be considered to be EMERGING MARKET COUNTRIES. The Fund employs a GROWTH STYLE of investing, which emphasizes companies that the portfolio managers believe have the potential to deliver unexpected earnings.
The portfolio managers look for foreign markets that they believe offer the potential for strong economic growth, and assess the valuation and growth rates both of a particular company and of the market where the company is located. They conduct proprietary research in order to form an independent perspective that provides a basis for valuing stocks. By comparing their own valuations of individual companies to those of the market, the portfolio managers pinpoint companies whose prospects appear different from the market's consensus.
The Fund also may use DERIVATIVES, such as futures and options, for efficient portfolio management.
The Adviser has chosen Gartmore Global Partners as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
FOREIGN RISK -foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
EMERGING MARKETS RISK - a magnification of the risks that apply to all foreign investments. These risks are greater for securities of companies in emerging market countries because the countries may have less stable governments, more volatile currencies and less established markets.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Morgan Stanley Capital International (MSCI) All Country World ex U.S. Index(SM), or other funds with similar investment objectives and strategies.
SMALL- AND MID-CAP SECURITIES RISK - in general, stocks of small-and mid-cap companies may be more volatile and less liquid than larger company stocks.
DERIVATIVES RISK - the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset or measure to which the derivative is linked changes in unexpected ways.
GROWTH STYLE RISK - over time a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
If the value of the Fund's investments goes down, you may lose money.
12 | GARTMORE INTERNATIONAL SERIES
SECTION 1 GARTMORE INTERNATIONAL GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 ------------------------------------------------ -23.49% -17.93% 38.33% 14.64% 29.09% 31.94% |
BEST QUARTER: 18.24% - 2ND QTR. OF 2003
WORST QUARTER: -20.96% - 3RD QTR. OF 2002
After-tax returns are shown in the table for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
(AUG. 30,
1 YEAR 5 YEARS 2000)
-------------------------------------------------------------------------------
Class A shares - Before Taxes 24.32% 15.88% 5.15%
-------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions 23.33% 15.65% 4.98%
-------------------------------------------------------------------------------
Class A shares - After Taxes on
Distributions and Sale of Shares 16.39% 13.92% 4.40%
-------------------------------------------------------------------------------
Class B shares - Before Taxes 26.04% 16.21% 5.37%
-------------------------------------------------------------------------------
Class C shares - Before Taxes(2,3) 29.95% 16.42% 5.46%
-------------------------------------------------------------------------------
Class R shares - Before Taxes(2) 31.51% 16.78% 5.62%
-------------------------------------------------------------------------------
Institutional Service Class shares -
Before Taxes 32.23% 17.57% 6.44%
-------------------------------------------------------------------------------
Institutional Class shares - Before Taxes(4) 32.24% 17.57% 6.44%
-------------------------------------------------------------------------------
MSCI All Country World ex U.S.Index(5) 27.16% 16.87% 7.55%
-------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Returns before the first offering of Class C shares (3/1/01) and Class R shares (12/30/03) are based on the previous performance of Class B shares. This performance is substantially similar to what Class C and Class R shares would have produced because all classes invest in the same portfolio of securities. Class C performance has been adjusted to reflect applicable sales charges. Returns for Class R shares have been adjusted to eliminate sales charges that do not apply to that class, but have not been adjusted to reflect any lower expenses.
3 A front-end sales charge that formerly applied to Class C shares was eliminated on April 1, 2004. Returns before that date have not been adjusted to eliminate the effect of the sales charge.
4 Returns before the first offering of Institutional Class shares (6/29/04) are based on the performance of Institutional Service class shares. This performance is substantially similar to what the Institutional Class shares would have produced because both classes invest in the same portfolio of securities. Returns for Institutional Class shares have not been adjusted to reflect its lower expenses.
5 The MSCI All Country World ex U.S. Index is an unmanaged free float-adjusted, market capitalization-weighted index that measures the performance of the stocks of companies in all countries except the United States. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE INTERNATIONAL SERIES | 13
SECTION 1 GARTMORE INTERNATIONAL GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on which share class you select.
------------------------------------------------------------------------------------------------------------------------------------ SHAREHOLDER FEES (PAID DIRECTLY FROM INSTITUTIONAL SERVICE INSTITUTIONAL YOUR INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ------------------------------------------------------------------------------------------------------------------------------------ Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ------------------------------------------------------------------------------------------------------------------------------------ Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ------------------------------------------------------------------------------------------------------------------------------------ Redemption/Exchange Fee (as a percentage of amount redeemed or exchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ------------------------------------------------------------------------------------------------------------------------------------ Management Fees (paid to have the Fund's investments professionally managed)(7) 0.97% 0.97% 0.97% 0.97% 0.97% 0.97% ------------------------------------------------------------------------------------------------------------------------------------ Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ------------------------------------------------------------------------------------------------------------------------------------ Other Expenses(8) 0.51% 0.47% 0.47% 0.67% 0.48% 0.47% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES 1.73% 2.44% 2.44% 2.14% 1.45% 1.44% ------------------------------------------------------------------------------------------------------------------------------------ Amount of Fee Waiver/Expense Reimbursement(9) 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% ------------------------------------------------------------------------------------------------------------------------------------ TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 1.69% 2.40% 2.40% 2.10% 1.41% 1.40% ------------------------------------------------------------------------------------------------------------------------------------ |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1% will apply to redemptions of Class A shares if purchased without sales charges and for which a finders fee was paid. See Section 4, Investing with Gartmore Funds: Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 The management fee may be adjusted (1) by breakpoints to the base
management fee depending on the assets in the Fund, and (2) upward or
downward by up to 0.10% (+/-) depending on the Fund's performance relative
to its benchmark, the MSCI All Country World ex-U.S. Index. Therefore, the
management fee stated in the table above reflects, to the extent
applicable, adjustments based on the Fund's assets and the Fund's
performance relative to its benchmark as of October 31, 2006. Depending on
the performance of the Fund, the management fee at the Fund's current
asset level could range from 0.80% at its lowest to 1.00% at its highest.
For more information, including a chart that shows the range of the
minimum to maximum performance-based fees at all breakpoint levels, see
Section 3, Fund Management: Management Fees.
8 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class shares were 0.04%, 0.20% and 0.01%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
9 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.40% at least through February 28, 2008 for all share classes. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.90% for Class A shares, 2.15% for Class R shares and 1.65% for Institutional Service Class shares before the Adviser would be required to further limit the Fund's expenses.
14 | GARTMORE INTERNATIONAL SERIES
SECTION 1 GARTMORE INTERNATIONAL GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 737 $ 1,085 $ 1,456 $ 2,495
--------------------------------------------------------------------------------
Class B shares 743 1,057 1,497 2,516
--------------------------------------------------------------------------------
Class C shares 343 757 1,297 2,773
--------------------------------------------------------------------------------
Class R shares 213 666 1,146 2,469
--------------------------------------------------------------------------------
Institutional Service Class shares 144 455 788 1,732
--------------------------------------------------------------------------------
Institutional Class shares 143 452 783 1,721
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 243 $ 757 $ 1,297 $ 2,516
--------------------------------------------------------------------------------
Class C shares 243 757 1,297 2,773
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE INTERNATIONAL SERIES | 15
SECTION 2 FUND INFORMATION
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - Each of the Funds could lose value if the individual stocks in which it has invested and/or the overall stock markets on which the stocks trade decline in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large-cap stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events, and the fluctuation of other stock markets around the world.
FOREIGN SECURITIES RISK - Each of the Funds may invest in foreign securities, which may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities; the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
DEPOSITARY RECEIPTS - The Funds may invest in securities of foreign issuers in the form of depositary receipts, such as American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which typically are issued by local financial institutions and evidence ownership of the underlying securities.
Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Depositary receipts may or may not be jointly sponsored by the underlying issuer. The issuers of unsponsored depositary receipts are not obligated to disclose information that is, in the United States, considered material. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Certain depositary receipts are not listed on an exchange and therefore may be considered to be illiquid securities.
EQUITY-LINKED NOTES - The China Opportunities Fund may invest in equity-linked notes, which are generally subject to the same risks as the foreign equity securities or the basket of foreign securities they are linked to. Upon the maturity of the note, the holder generally receives a return of principal based on the capital appreciation of the linked security(ies). If the linked security(ies) declines in value, the note may return a lower amount at maturity. The trading price of an equity-linked note also depends on the value of the linked security(ies). Equity-linked notes involve further risks associated with:
o purchases and sales of notes, including the possibility that exchange rate fluctuations may negatively affect the value of a note and
o the credit quality of the note's issuer.
Equity-linked notes are frequently secured by collateral. If an issuer defaults, the Fund would look to any underlying collateral to recover its losses. Ratings of issuers of equity-linked notes refer only to the issuer's creditworthiness and the related collateral. They provide no indication of the potential risks of the linked securities.
PREFERRED STOCK - a class of stock that often pays dividends at a specified rate and has preference over common stock in dividend payments and liquidation of assets. Preferred stock may be convertible into common stock.
DERIVATIVES - a derivative is a contract with its value based on the performance of an underlying financial asset, index or other measure. For example, an option is a derivative because its value changes in relation to the performance of an underlying stock. The value of an option on a futures contract varies with the value of the underlying futures contract, which in turn varies with the value of the underlying commodity or security. Derivatives present the risk of disproportionately increased losses and/or reduced opportunities for gains when the financial asset to which the derivative is linked changes in unexpected ways. Some risks of investing in derivatives include:
o the other party to the derivatives contract may fail to fulfill its obligations;
o their use may reduce liquidity and make the Fund harder to value, especially in declining markets;
o the Fund may suffer disproportionately heavy losses relative to the amount invested and
o changes in the value of derivatives may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
16 | GARTMORE INTERNATIONAL SERIES
SECTION 2 FUND INFORMATION (CONT.)
SECURITIES LENDING - The Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. These events could under certain circumstances trigger adverse tax consequences to a Fund.
PORTFOLIO TURNOVER -The Funds may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
TEMPORARY INVESTMENTS - Each of the Funds generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances, and interest- bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
GARTMORE INTERNATIONAL SERIES | 17
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER AND SUBADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser manages the investment of the Funds' assets and supervises the daily business affairs of the Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Funds' respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
Gartmore Global Partners ("GGP"), 8 Fenchurch Place, London, England, United Kingdom, is the subadviser for each of the Funds and manages each Fund's assets in accordance with the investment objective and strategies. GGP makes investment decisions and executes them by placing purchase and sell orders for securities. Effective September 29, 2006, GGP ceased to be an affiliate of either the Adviser or NWD Investments.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory and subadvisory agreements for the Funds will be available in the Funds' semiannual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
MANAGEMENT FEES
Each Fund pays the Adviser a base management fee, which is based on a Fund's average daily net assets. The Adviser pays GGP a subadvisory fee from the management fee the Adviser collects from each Fund. The management fee for each of the Funds may increase or decrease depending on how each Fund performs relative to its respective benchmark. The Funds' benchmarks for determining these performance-based fees are:
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund MSCI Zhong Hua Index
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund MSCI Emerging Markets Index
--------------------------------------------------------------------------------
Gartmore International Growth Fund MSCI All Country World
ex U.S. Index
--------------------------------------------------------------------------------
|
PERFORMANCE-BASED FEES
Each Fund pays a performance-based fee to the Adviser. This performance-based fee can vary depending on the Fund's performance relative to its respective benchmark. This fee is intended to either reward or penalize the Adviser for outperforming or underperforming, respectively, each Fund's benchmark.
The calculation of this fee is done in two separate steps. First, the Fund pays a base fee (to be paid at the end of each quarter), as adjusted for any applicable breakpoints as described in the chart shown below under the heading "Management and Subadvisory Fees" (the "Base Fee Breakpoints"). The base fee rate results in an annual fee, calculated and accrued daily. The fee rate is applied to each such Fund's average net assets over that quarter. Second, a performance adjustment percentage is applied to the Fund's average net assets over the 12-month rolling performance period. The performance adjustment amount is then added to (or subtracted from, as applicable) the base fee to arrive at the Fund's total advisory fee for the most recently completed quarterly sub- period and that total fee is paid at the end of that most recently completed quarter.
The performance fee calculation applies to all of a Fund's share classes equally, based on the performance of the Class A shares during the performance period. The table below shows the performance adjustment rate applicable to each Fund's base fee (as such base fee may be adjusted by Base Fee Breakpoints, as described under "Management and Subadvisory Fees").
-------------------------------------------------------------------------------- OUT OR UNDERPERFORMANCE CHANGE IN FEES -------------------------------------------------------------------------------- +/- 1 percentage point +/- 0.02% -------------------------------------------------------------------------------- +/- 2 percentage points +/- 0.04% -------------------------------------------------------------------------------- +/- 3 percentage points +/- 0.06% -------------------------------------------------------------------------------- +/- 4 percentage points +/- 0.08% -------------------------------------------------------------------------------- +/- 5 percentage points +/- 0.10% -------------------------------------------------------------------------------- |
These performance-adjusted advisory fees are paid quarterly. The SAI contains more detailed information about any possible performance adjustments.
Under these performance fee arrangements, the Adviser can receive a performance fee increase even if a Fund experiences negative performance that still exceeds its benchmark by more than the relevant percentage amount shown above.
18 | GARTMORE INTERNATIONAL SERIES
SECTION 3 FUND MANAGEMENT (CONT.)
The table below shows the base management fees, as well as the maximum and minimum performance-adjusted fees, if applicable, and actual management fees paid during the fiscal year ended October 31, 2006. The table also shows the base subadvisory fee, as well as the maximum and minimum performance-adjusted subadvisory fee, if applicable, and actual subadvisory fees paid during the same period. It does not take into account any applicable waivers.
MINIMUM FEE BASE FEE MAXIMUM FEE
NET ASSETS MANAGEMENT SUBADVISORY MANAGEMENT SUBADVISORY MANAGEMENT SUBADVISORY
GARTMORE CHINA OPPORTUNITIES FUND
--------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 1.15% 0.525% 1.25% 0.625% 1.35% 0.725%
--------------------------------------------------------------------------------------------------------------------
On assets of $500 million
up to $2 billion 1.10% 0.500% 1.20% 0.600% 1.30% 0.700%
--------------------------------------------------------------------------------------------------------------------
On assets of $2 billion
and more 1.05% 0.475% 1.15% 0.575% 1.25% 0.675%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
GARTMORE EMERGING MARKETS FUND
--------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.95% 0.425% 1.05% 0.525% 1.15% 0.625%
--------------------------------------------------------------------------------------------------------------------
On assets of $500 million
up to $2 billion 0.90% 0.40% 1.00% 0.50% 1.10% 0.60%
--------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.85% 0.375% 0.95% 0.475% 1.05% 0.575%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
GARTMORE INTERNATIONAL GROWTH FUND
--------------------------------------------------------------------------------------------------------------------
On assets up to $500 million 0.80% 0.35% 0.90% 0.45% 1.00% 0.55%
--------------------------------------------------------------------------------------------------------------------
On assets of $500 million
up to $2 billion 0.75% 0.325% 0.85% 0.425% 0.95% 0.525%
--------------------------------------------------------------------------------------------------------------------
On assets of $2 billion and more 0.70% 0.30% 0.80% 0.40% 0.90% 0.40%
--------------------------------------------------------------------------------------------------------------------
|
ACTUAL MANAGEMENT AND SUBADVISORY FEES PAID NET OF WAIVERS DURING FISCAL YEAR ENDED OCTOBER 31, 2006 (EXPRESSED AS A PERCENTAGE OF A FUND'S AVERAGE DAILY NET ASSETS AND TAKING INTO ACCOUNT ANY APPLICABLE WAIVERS)
MANAGEMENT FEE SUBADVISORY FEE
----------------------------------------------------------------------
Gartmore China Opportunities Fund 1.29% 0.63%
----------------------------------------------------------------------
Gartmore Emerging Markets Fund* 1.00% 0.525%
----------------------------------------------------------------------
Gartmore International Growth Fund* 0.97% 0.46%
----------------------------------------------------------------------
|
* NWD Management & Research Trust (formerly known as Gartmore Global Asset Management Trust) was the investment adviser to the Gartmore Emerging Markets Fund and the Gartmore International Growth Fund until September 29, 2006 when it transferred all of its investment advisory responsibilities to the Adviser, its wholly-owned subsidiary.
GARTMORE INTERNATIONAL SERIES | 19
SECTION 3 FUND MANAGEMENT (CONT.)
PORTFOLIO MANAGEMENT
GARTMORE CHINA OPPORTUNITIES FUND
Charlie Awdry, CFA, is responsible for the day-to-day management of the Fund, including selection of the Fund's investments. Mr. Awdry has assisted in the management of the Fund since its inception in June 2004.
Mr. Awdry joined GGP in September 2001 and, two years later, he assumed the role of investment manager, co-managing a China investment fund in the United Kingdom (UK). As co-manager of the UK Gartmore China Opportunities Fund, Mr. Awdry spent six months working in Gartmore's Hong Kong office, returning in April 2006. Prior to 2001, Mr. Awdry was at the University of Bristol where he graduated with a first class Honours BA in Geography.
GARTMORE EMERGING MARKETS FUND
Christopher Palmer, CFA, of the Global Emerging Markets team is the portfolio manager of the Fund. He is responsible for the day-to-day management of the Fund, including selection of the Fund's investments.
Mr. Palmer has been with GGP since 1995 and has extensive experience in Emerging Markets, Latin America, and hedge fund investments, including five years managing AlphaGen hedge funds. He previously co-managed the Fund from its inception in August 2000 through February 2004. Mr. Palmer graduated from Colgate University in 1986. In 1988, he completed an MBA in Finance at New York University. He currently also manages or co-manages the Gartmore GVIT Emerging Markets Fund and the Gartmore GVIT Developing Markets Fund.
GARTMORE INTERNATIONAL GROWTH FUND
The GGP Global Equities team manages the Gartmore International Growth Fund. Brian ONeill and Ben Walker are responsible for the day-to-day management of the Fund and the selection of the Fund's investments, and have jointly managed the Fund since January 7, 2004.
Mr. O'Neill joined GGP as a Senior Investment Manager on the Global Portfolio team in 1981 with responsibility for a variety of global funds. Mr. O'Neill graduated from Glasgow University in 1969 with an Honours degree in Political Economy. Mr. O'Neill currently also manages or co-manages the the Gartmore GVIT International Growth Fund.
Mr. Walker, CFA, Senior Investment Manager, Global Equities, joined GGP in 1997. Mr. Walker graduated from St. Edmund Hall, Oxford University, with an Honours degree in Politics, Philosophy and Economics in 1993. Mr. Walker currently also manages or co-manages the Gartmore Global Utilities Fund, the Gartmore GVIT Global Utilities Fund and the Gartmore GVIT International Growth Fund.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are managed by the Adviser and subadvised by GGP. If a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows these Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser for the Funds, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
20 | GARTMORE INTERNATIONAL SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class shares and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES
Front-end sales charge A front-end sales charge means that a portion of
up to 5.75% your initial investment goes toward the sales
charge and is not invested.
Contingent deferred Reduction and waivers of sales charges may sales
(CDSC)(1) charge be available.
Annual service and/or Total annual operating expenses are lower than
12b-1 fee of 0.25% Class B and Class C expenses which means higher
Administrative services dividends and/or net asset value ("NAV") per
fee up to 0.25% share.
No conversion feature.
No maximum investment amount.
--------------------------------------------------------------------------------
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines 1% in most years to zero after six
years.
Annual service and/or Total annual operating expenses are higher than
12b-1 fee of 1.00% Class A expenses which means lower dividends
No administrative and/or NAV per share.
services fee
Automatic conversion to Class A shares after seven
years, which means lower annual expenses in the
future.
Maximum investment amount of $100,000. Larger
investments may be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are higher than
12b-1 fee of 1.00% Class A expenses which means lower dividends
No administrative and/or NAV per share.
services fee
No conversion feature.
Maximum investment amount of $1,000,000(2). Larger
investments may be rejected.
--------------------------------------------------------------------------------
|
1 Unless you are eligible to purchase Class A shares without a sales charge, a CDSC of up to 1.00% may be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
GARTMORE INTERNATIONAL SERIES | 21
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
---------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
---------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
---------------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
---------------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
---------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
---------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
---------------------------------------------------------------------------------
$1 million or more None None None*
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|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
22 | GARTMORE INTERNATIONAL SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 1.00% applies if a "finder's fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finder's fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason; or
o no finder's fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES
--------------------------------------------------------------------------------- AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE --------------------------------------------------------------------------------- If sold within 18 months 18 months 18 months --------------------------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% --------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund(s) is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70 1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
----------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEAR OR MORE
----------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
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|
GARTMORE INTERNATIONAL SERIES | 23
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The Funds offer Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires,
o the total expenses of the share class and
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial services firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
24 | GARTMORE INTERNATIONAL SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Fund;
o retirement plans for which no third-party administrator receives compensation from the Fund(s);
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Institutional Class and Institutional Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
--------------------------------------------------------------------------------
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
|
ADMINISTRATIVE SERVICES FEES
Class A, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by the Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
GARTMORE INTERNATIONAL SERIES | 25
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses,
o obtain information on the Gartmore Funds,
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
26 | GARTMORE INTERNATIONAL SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON 60 DAYS
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND WRITTEN NOTICE TO SHAREHOLDERS.
THE SALE OF SHARES AT ANY TIME.
**A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE "MEDALLION
SIGNATURE GUARANTEE" BELOW.
THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, intermediaries who are authorized to accept purchase, exchange and
exchange and redemption orders for the Funds. Your redemption orders for the Funds. Your transaction is processed at
transaction is processed at the NAV next calculated after the NAV next calculated after the Funds' agent or an authorized
the Funds' agent or an authorized intermediary receives your intermediary receives your order in proper form.
order in proper form.
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BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. mailing or faxing a letter to Gartmore Funds. The letter must
dollars and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT include your account number(s) and the name(s) of the Fund(s) you
CASH, STARTER CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, wish to exchange from and to. The letter must be signed by all
CREDIT CARD CHECKS OR MONEY ORDERS. account owners. We reserve the right to request original documents
for any faxed requests.
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BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges unless
unless you decline this option on your application. The you decline this option on your application. The Funds follow
Funds follow procedures to confirm that telephone procedures to confirm that telephone instructions are genuine and
instructions are genuine and will not be liable for any will not be liable for any loss, injury, damage or expense that
loss, injury, damage or expense that results from executing results from executing such instructions. The Funds may revoke
such instructions. The Funds may revoke telephone privileges telephone privileges at any time, without notice to shareholders.
at any time, without notice to shareholders. For redemptions, shareholders who own shares in an IRA account
should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES: A check made payable to
the shareholder(s) of record will be mailed to the address of
record.
The Funds may record telephone instructions to redeem shares and
may request redemption instructions in writing, signed by all
shareholders on the account.
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ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line website. However, the Funds may discontinue on-line transactions of
transactions of Fund shares at any time. Fund shares at any time.
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BY BANK WIRE. You may have your bank transmit funds by BY BANK WIRE. The Funds can wire the proceeds of your redemption
federal funds wire to the Funds' custodian bank. (The directly to your account at a commercial bank. A voided check must
authorization will be in effect unless you give the Funds be attached to your application. (The authorization will be in
written notice of its termination.) effect unless you give the Fund written notice of its termination.)
o if you choose this method to open a new account, you o your proceeds typically will be wired to your bank on the
must call our toll-free number before you wire your next business day after your order has been processed.
investment and arrange to fax your completed
application. o Gartmore Funds deducts a $20 service fee from the redemption
proceeds for this service.
o your bank may charge a fee to wire funds.
o your financial institution may also charge a fee for
o the wire must be received by 4:00 p.m. in order to receiving the wire.
receive the current day's NAV.
o funds sent outside the U.S. may be subject to higher fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund your BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds can be
Gartmore Funds' account with proceeds from your bank via ACH sent to your bank via ACH on the second business day after your
on the second business day after your purchase order has order has been processed. A voided check must be attached to your
been processed. A voided check must be attached to your application. Money sent through ACH should reach your bank in two
application. Money sent through ACH typically reaches business days. There is no fee for this service. (The authorization
Gartmore Funds from your bank in two business days. There is will be in effect unless you give the Funds written notice of its
no fee for this service. (The authorization will be in termination.)
effect unless you give the Funds written notice of its
termination.) ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement plan
plan administrator regarding transactions. Retirement plans administrator regarding transactions. Retirement plans or their
or their administrators wishing to conduct transactions administrators wishing to conduct transactions should call our
should call our toll-free number. Eligible entities or toll-free number. Eligible entities or individuals wishing to
individuals wishing to conduct transactions in Institutional conduct transactions in Institutional Service Class or
Service Class or Institutional Class shares should call our Institutional Class shares should call our toll-free number.
toll-free number.
|
GARTMORE INTERNATIONAL SERIES | 27
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
28 | GARTMORE INTERNATIONAL SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS B AND CLASS C SHARES To open an account $ 2,000 (per Fund) To open an IRA account $ 1,000 (per Fund) Additional investments $ 100 (per Fund) To start an Automatic Asset Accumulation Plan $ 1,000 (per Fund) Additional investments (Automatic Asset Accumulation Plan) $ 50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $ 50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities.
Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Funds, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund).
GARTMORE INTERNATIONAL SERIES | 29
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C Shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a minimum amount of $50 or more. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell or, in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or the Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings),
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
30 | GARTMORE INTERNATIONAL SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or redemptions and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high--yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser, its subadvisers and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares-Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
GARTMORE INTERNATIONAL SERIES | 31
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you redeem or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70-1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund for less than the minimum holding period listed below:
--------------------------------------------------------------------------------
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology and
Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
32 | GARTMORE INTERNATIONAL SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee a Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from the Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gain tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in the Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gains distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
GARTMORE INTERNATIONAL SERIES | 33
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
34 | GARTMORE INTERNATIONAL SERIES
SECTION 6 GARTMORE CHINA OPPORTUNITIES FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31 or, if a Fund or a class has not been in operations for the past five years, for the life of each Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP. Their report and the Funds' financial statements are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 1.25 1.26
Year Ended October 31, 2005 $ 11.24 0.09 0.33 0.42
Year Ended October 31, 2006 $ 11.25 0.05 5.54 5.59
--------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 1.23 1.24
Year Ended October 31, 2005 $ 11.23 0.03 0.31 0.34
Year Ended October 31, 2006 $ 11.19 (0.04) 5.49 5.45
--------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.01) 1.24 1.23
Year Ended October 31, 2005 $ 11.23 0.02 0.31 0.33
Year Ended October 31, 2006 $ 11.19 (0.03) 5.48 5.45
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 1.24 1.25
Year Ended October 31, 2005 $ 11.24 0.06 0.33 0.39
Year Ended October 31, 2006 $ 11.23 0.08 5.44 5.52
--------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.02 1.25 1.27
Year Ended October 31, 2005 $ 11.25 0.09 0.34 0.43
Year Ended October 31, 2006 $ 11.25 0.11 5.51 5.62
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.02 1.25 1.27
Year Ended October 31, 2005 $ 11.25 0.12 0.34 0.46
Year Ended October 31, 2006 $ 11.27 0.05 5.58 5.63
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL REDEMPTION VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) (0.02) - (0.02) - $ 11.24 12.61%(e)
Year Ended October 31, 2005 (0.07) (0.34) (0.41) - $ 11.25 3.58%
Year Ended October 31, 2006 (0.05) (0.94) (0.99) 0.01 $ 15.86 53.19%
---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) (0.01) - (0.01) - $ 11.23 12.38%(e)
Year Ended October 31, 2005 (0.04) (0.34) (0.38) - $ 11.19 2.82%
Year Ended October 31, 2006 (0.01) (0.94) (0.95) 0.01 $ 15.70 52.07%
---------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) - - - - $ 11.23 12.30%(e)
Year Ended October 31, 2005 (0.03) (0.34) (0.37) - $ 11.19 2.79%
Year Ended October 31, 2006 (0.01) (0.94) (0.95) 0.01 $ 15.70 52.11%
---------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) (0.01) - (0.01) - $ 11.24 12.46%(e)
Year Ended October 31, 2005 (0.06) (0.34) (0.40) - $ 11.23 3.29%
Year Ended October 31, 2006 (0.03) (0.94) (0.97) 0.01 $ 15.79 52.68%
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) (0.02) - (0.02) - $ 11.25 12.74%(e)
Year Ended October 31, 2005 (0.09) (0.34) (0.43) - $ 11.25 3.63%
Year Ended October 31, 2006 (0.06) (0.94) (1.00) 0.01 $ 15.88 53.57%
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) (0.02) - (0.02) - $ 11.25 12.74%(e)
Year Ended October 31, 2005 (0.10) (0.34) (0.44) - $ 11.27 3.86%
Year Ended October 31, 2006 (0.06) (0.94) (1.00) 0.01 $ 15.91 53.57%
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 1,029 1.95%(f) 0.37%(f) 5.57%(f) (3.25%)(f) 50.76%
Year Ended October 31, 2005 $ 2,847 2.01% 0.95% 2.68% 0.28% 130.48%
Year Ended October 31, 2006 $ 14,470 1.99% 0.44% 2.10% 0.33% 124.36%
---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 19 2.65%(f) (0.14%)(f) 6.09%(f) (3.57%)(f) 50.76%
Year Ended October 31, 2005 $ 315 2.74% 0.33% 3.41% (0.34%) 130.48%
Year Ended October 31, 2006 $ 1,210 2.73% (0.47%) 2.85% (0.59%) 124.36%
---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 38 2.65%(f) (1.42%)(f) 6.93%(f) (5.69%)(f) 50.76%
Year Ended October 31, 2005 $ 1,258 2.73% 0.24% 3.42% (0.45%) 130.48%
Year Ended October 31, 2006 $ 5,247 2.73% (0.25%) 2.85% (0.37%) 124.36%
---------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 2.40%(f) (0.18%)(f) 4.86%(f) (2.64%)(f) 50.76%
Year Ended October 31, 2005 $ 1 2.22% 0.49% 2.87% (0.16%) 130.48%
Year Ended October 31, 2006 $ 7 2.28% 0.68% 2.36% 0.61% 124.36%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 1 1.70%(f) 0.51%(f) 3.97%(f) (1.75%)(f) 50.76%
Year Ended October 31, 2005 $ 1 1.82% 0.84% 2.48% 0.18% 130.48%
Year Ended October 31, 2006 $ 120 1.72% 1.34% 1.81% 1.25% 124.36%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 5,637 1.65%(f) 0.59%(f) 4.17%(f) (1.93%)(f) 50.76%
Year Ended October 31, 2005 $ 5,854 1.72% 0.98% 2.41% 0.29% 130.48%
Year Ended October 31, 2006 $ 8,994 1.74% 0.31% 1.88% 0.17% 124.36%
---------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For period from June 29, 2004 (commencement of operations) through October 31, 2004.
(e) Not annualized.
(f) Annualized.
GARTMORE INTERNATIONAL SERIES | 35
SECTION 6 GARTMORE EMERGING MARKETS FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 5.98 (0.03) 0.85 0.82
Year Ended October 31, 2003 $ 6.80 0.03 3.71 3.74
Year Ended October 31, 2004 $ 10.54 0.05 1.70 1.75
Year Ended October 31, 2005 $ 12.27 0.08 3.47 3.55
Year Ended October 31, 2006 $ 14.92 0.10 4.49 4.59
--------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 5.94 (0.08) 0.85 0.77
Year Ended October 31, 2003 $ 6.71 - 3.62 3.62
Year Ended October 31, 2004 $ 10.33 (0.03) 1.67 1.64
Year Ended October 31, 2005 $ 11.98 (0.01) 3.37 3.36
Year Ended October 31, 2006 $ 14.48 (0.01) 4.35 4.34
--------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 6.02 (0.08) 0.86 0.78
Year Ended October 31, 2003 $ 6.80 - 3.67 3.67
Year Ended October 31, 2004 $ 10.47 (0.02) 1.68 1.66
Year Ended October 31, 2005 $ 12.14 (0.01) 3.42 3.41
Year Ended October 31, 2006 $ 14.69 (0.01) 4.42 4.41
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 11.20 0.03 0.78 0.81
Year Ended October 31, 2005 $ 12.01 0.04 3.41 3.45
Year Ended October 31, 2006 $ 14.57 0.05 4.40 4.45
--------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 6.01 (0.02) 0.87 0.85
Year Ended October 31, 2003 $ 6.86 0.08 3.72 3.80
Year Ended October 31, 2004 $ 10.66 0.09 1.72 1.81
Year Ended October 31, 2005 $ 12.43 0.10 3.54 3.64
Year Ended October 31, 2006 $ 15.14 0.17 4.56 4.73
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) $ 11.26 0.03 1.15 1.18
Year Ended October 31, 2005 $ 12.43 0.11 3.53 3.64
Year Ended October 31, 2006 $ 15.14 0.13 4.60 4.73
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL REDEMPTION VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS FEES OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 - - - - $ 6.80 13.71%
Year Ended October 31, 2003 - - - - $ 10.54 55.00%
Year Ended October 31, 2004 (0.05) - (0.05) 0.03 $ 12.27 16.97%
Year Ended October 31, 2005 (0.05) (0.85) (0.90) - $ 14.92 30.02%
Year Ended October 31, 2006 (0.10) (1.59) (1.69) - $ 17.82 32.89%
---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 - - - - $ 6.71 12.96%
Year Ended October 31, 2003 - - - - $ 10.33 53.95%
Year Ended October 31, 2004 (0.02) - (0.02) 0.03 $ 11.98 16.14%
Year Ended October 31, 2005 (0.01) (0.85) (0.86) - $ 14.48 29.30%
Year Ended October 31, 2006 (0.02) (1.59) (1.61) - $ 17.21 31.97%
---------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 - - - - $ 6.80 12.96%
Year Ended October 31, 2003 - - - - $ 10.47 53.97%
Year Ended October 31, 2004 (0.02) - (0.02) 0.03 $ 12.14 16.21%
Year Ended October 31, 2005 (0.01) (0.85) (0.86) - $ 14.69 29.20%
Year Ended October 31, 2006 (0.02) (1.59) (1.61) - $ 17.49 31.92%
---------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) (0.03) - (0.03) 0.03 $ 12.01 7.50%(f)
Year Ended October 31, 2005 (0.04) (0.85) (0.89) - $ 14.57 30.11%
Year Ended October 31, 2006 (0.11) (1.59) (1.70) - $ 17.32 32.65%
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 - - - - $ 6.86 14.14%
Year Ended October 31, 2003 - - - - $ 10.66 55.39%
Year Ended October 31, 2004 (0.07) - (0.07) 0.03 $ 12.43 17.25%
Year Ended October 31, 2005 (0.08) (0.85) (0.93) - $ 15.14 30.60%
Year Ended October 31, 2006 (0.14) (1.59) (1.73) - $ 18.14 33.25%
---------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) (0.04) - (0.04) 0.03 $ 12.43 10.79%(f)
Year Ended October 31, 2005 (0.08) (0.85) (0.93) - $ 15.14 30.60%
Year Ended October 31, 2006 (0.14) (1.59) (1.73) - $ 18.14 33.32%
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
--------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,996 2.01% (0.49%) 2.41% (0.89%) 57.86%
Year Ended October 31, 2003 $ 9,070 1.88% 0.61% 2.45% 0.05% 146.04%
Year Ended October 31, 2004 $ 13,898 1.88% 0.41% 1.99% 0.31% 134.11%
Year Ended October 31, 2005 $ 22,009 1.84% 0.55% (h) (h) 135.40%
Year Ended October 31, 2006 $ 34,047 1.65% 0.60% 1.66% 0.59% 141.70%
--------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 1,443 2.71% (1.18%) 3.22% (1.69%) 57.86%
Year Ended October 31, 2003 $ 2,010 2.55% 0.07% 3.18% (0.56%) 146.04%
Year Ended October 31, 2004 $ 2,900 2.55% (0.27%) 2.65% (0.37%) 134.11%
Year Ended October 31, 2005 $ 4,062 2.52% (0.11%) (h) (h) 135.40%
Year Ended October 31, 2006 $ 6,013 2.31% (0.08%) 2.32% (0.09%) 141.70%
--------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 15 2.72% (1.12%) 3.28% (1.68%) 57.86%
Year Ended October 31, 2003 $ 1,398 2.55% (0.12%) 2.95% (0.52%) 146.04%
Year Ended October 31, 2004 $ 2,217 2.55% (0.16%) 2.64% (0.25%) 134.11%
Year Ended October 31, 2005 $ 4,302 2.51% (0.11%) (h) (h) 135.40%
Year Ended October 31, 2006 $ 7,716 2.31% (0.07%) 2.32% (0.08%) 141.70%
--------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 2.15%(g) 0.26%(g) 2.28%(g) 0.13%(g) 134.11%
Year Ended October 31, 2005 $ 9 1.82% 0.16% (h) (h) 135.40%
Year Ended October 31, 2006 $ 456 1.84% (0.01%) 1.94% (0.11%) 141.70%
--------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 1,145 1.73% (0.21%) 2.24% (0.72%) 57.86%
Year Ended October 31, 2003 $ 1,781 1.55% 1.07% 2.18% 0.44% 146.04%
Year Ended October 31, 2004 $ 3,737 1.55% 0.81% 1.66% 0.70% 134.11%
Year Ended October 31, 2005 $ 8,954 1.50% 0.83% (h) (h) 135.40%
Year Ended October 31, 2006 (i) $ 3,066 1.34% 1.01% 1.34% 1.00% 141.70%
--------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) $ 236 1.55%(g) 0.81%(g) 1.71%(g) 0.65%(g) 134.11%
Year Ended October 31, 2005 $ 2,631 1.49% 0.92% (h) (h) 135.40%
Year Ended October 31, 2006 $ 10,390 1.30% 0.88% 1.33% 0.85% 141.70%
--------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(e) For period from June 29, 2004 (commencement of operations) through October 31, 2004.
(f) Not annualized.
(g) Annualized.
(h) There were no fee reductions in this period.
(i) Net investment income (loss) is based on average shares outstanding during the period.
36 | GARTMORE INTERNATIONAL SERIES
SECTION 6 GARTMORE INTERNATIONAL GROWTH FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
---------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
---------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 6.19 0.01 (0.82) (0.81)
Year Ended October 31, 2003 $ 5.38 (0.01) 1.58 1.57
Year Ended October 31, 2004 $ 6.98 0.01 0.79 0.80
Year Ended October 31, 2005 $ 7.79 0.08 1.90 1.98
Year Ended October 31, 2006 $ 9.69 0.02 3.68 3.70
---------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 6.14 (0.03) (0.81) (0.84)
Year Ended October 31, 2003 $ 5.30 (0.05) 1.54 1.49
Year Ended October 31, 2004 $ 6.82 (0.05) 0.78 0.73
Year Ended October 31, 2005 $ 7.56 0.01 1.83 1.84
Year Ended October 31, 2006 $ 9.35 (0.08) 3.57 3.49
---------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 6.17 (0.03) (0.81) (0.84)
Year Ended October 31, 2003 $ 5.33 (0.05) 1.55 1.50
Year Ended October 31, 2004 $ 6.86 (0.01) 0.74 0.73
Year Ended October 31, 2005 $ 7.60 0.03 1.82 1.85
Year Ended October 31, 2006 $ 9.40 (0.02) 3.54 3.52
---------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 7.25 0.02 0.30 0.32
Year Ended October 31, 2005 $ 7.58 0.07 1.86 1.93
Year Ended October 31, 2006 $ 9.41 (0.04) 3.61 3.57
---------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 6.22 0.03 (0.83) (0.80)
Year Ended October 31, 2003 $ 5.42 0.01 1.59 1.60
Year Ended October 31, 2004 $ 7.05 0.02 0.81 0.83
Year Ended October 31, 2005 $ 7.89 0.11 1.91 2.02
Year Ended October 31, 2006 $ 9.81 0.02 3.77 3.79
---------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) $ 7.51 - 0.37 0.37
Year Ended October 31, 2005 $ 7.89 0.11 1.91 2.02
Year Ended October 31, 2006 $ 9.81 0.03 3.76 3.79
---------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
DIVIDENDS
----------------------------------------------------------------------------------------------------------
NET NET ASSET
INVESTMENT TOTAL REDEMPTION VALUE, END TOTAL
INCOME DISTRIBUTIONS FEES OF PERIOD RETURN (a)
----------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 - - - $ 5.38 (13.09%)
Year Ended October 31, 2003 - - 0.03 $ 6.98 29.74%
Year Ended October 31, 2004 - - 0.01 $ 7.79 11.60%
Year Ended October 31, 2005 (0.08) (0.08) - $ 9.69 25.49%
Year Ended October 31, 2006 (0.04) (0.04) - $ 13.35 38.22%
----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 - - - $ 5.30 (13.68%)
Year Ended October 31, 2003 - - 0.03 $ 6.82 28.68%
Year Ended October 31, 2004 - - 0.01 $ 7.56 10.85%
Year Ended October 31, 2005 (0.05) (0.05) - $ 9.35 24.49%
Year Ended October 31, 2006 (0.01) (0.01) - $ 12.83 37.37%
----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 - - - $ 5.33 (13.61%)
Year Ended October 31, 2003 - - 0.03 $ 6.86 28.71%
Year Ended October 31, 2004 - - 0.01 $ 7.60 10.79%
Year Ended October 31, 2005 (0.05) (0.05) - $ 9.40 24.45%
Year Ended October 31, 2006 (0.02) (0.02) - $ 12.90 37.49%
----------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - - 0.01 $ 7.58 4.55%(f)
Year Ended October 31, 2005 (0.10) (0.10) - $ 9.41 25.37%
Year Ended October 31, 2006 (0.03) (0.03) - $ 12.95 38.01%
----------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 - - - $ 5.42 (12.86%)
Year Ended October 31, 2003 - - 0.03 $ 7.05 30.07%
Year Ended October 31, 2004 - - 0.01 $ 7.89 11.91%
Year Ended October 31, 2005 (0.10) (0.10) - $ 9.81 25.72%
Year Ended October 31, 2006 (0.05) (0.05) - $ 13.55 38.76%
----------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) - - 0.01 $ 7.89 5.06%(f)
Year Ended October 31, 2005 (0.10) (0.10) - $ 9.81 25.72%
Year Ended October 31, 2006 (0.05) (0.05) - $ 13.55 38.76%
----------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
--------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Year Ended October 31, 2002 $ 1,965 1.76% 0.20% 2.10% (0.14%) 226.70%
Year Ended October 31, 2003 $ 2,592 1.65% 0.39% 2.37% (0.33%) 304.72%
Year Ended October 31, 2004 $ 3,096 1.65% 0.06% 2.10% (0.38%) 262.09%
Year Ended October 31, 2005 $ 7,980 1.65% 0.74% 1.90% 0.50% 247.22%
Year Ended October 31, 2006 $ 26,565 1.69% (0.04%) 1.70% (0.05%) 175.91%
--------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year Ended October 31, 2002 $ 1,840 2.46% (0.50%) 2.85% (0.89%) 226.70%
Year Ended October 31, 2003 $ 2,395 2.40% (0.36%) 3.12% (1.08%) 304.72%
Year Ended October 31, 2004 $ 2,695 2.40% (0.70%) 2.84% (1.14%) 262.09%
Year Ended October 31, 2005 $ 3,444 2.40% 0.12% 2.81% (0.30%) 247.22%
Year Ended October 31, 2006 $ 6,031 2.41% (0.80%) 2.42% (0.82%) 175.91%
--------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year Ended October 31, 2002 $ 10 2.46% (0.53%) 2.95% (1.02%) 226.70%
Year Ended October 31, 2003 $ 16 2.40% (0.37%) 3.12% (1.09%) 304.72%
Year Ended October 31, 2004 $ 112 2.40% (0.23%) 2.87% (0.70%) 262.09%
Year Ended October 31, 2005 $ 272 2.40% 0.10% 2.69% (0.19%) 247.22%
Year Ended October 31, 2006 $ 9,566 2.40% (0.62%) 2.40% (0.62%) 175.91%
--------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 2.00%(g) 0.31%(g) 2.65%(g) (0.33%)(g) 262.09%
Year Ended October 31, 2005 $ 1 1.68% 0.81% 2.31% 0.18% 247.22%
Year Ended October 31, 2006 $ 2 1.94% (0.38%) 1.96% (0.39%) 175.91%
--------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Year Ended October 31, 2002 $ 1,807 1.48% 0.48% 1.85% 0.11% 226.70%
Year Ended October 31, 2003 $ 2,350 1.40% 0.64% 2.12% (0.08%) 304.72%
Year Ended October 31, 2004 $ 2,629 1.40% 0.30% 1.84% (0.14%) 262.09%
Year Ended October 31, 2005 $ 3,306 1.40% 1.12% 1.82% 0.70% 247.22%
Year Ended October 31, 2006 $ 4,589 1.41% 0.17% 1.42% 0.15% 175.91%
--------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (e) $ 189 1.40%(g) 0.03%(g) 1.94%(g) (0.52%)(g) 262.09%
Year Ended October 31, 2005 $ 1,372 1.40% 1.11% 1.61% 0.90% 247.22%
Year Ended October 31, 2006 $ 3,742 1.41% 0.22% 1.42% 0.20% 175.91%
--------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from December 30, 2003 (commencement of operations) through October 31, 2004.
(e) For period from June 29, 2004 (commencement of operations) through October 31, 2004.
(f) Not annualized.
(g) Annualized.
GARTMORE INTERNATIONAL SERIES | 37
This page intentionally left blank.
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest, and keep it with your records. The following documents -- which may be obtained free of charge -- contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund, or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920, or write to us at the address listed below, to request (1) additional copies free of charge, or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. -
9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for
closing share prices. Also, visit the Gartmore Funds' website at
www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov;
o by electronic request to publicinfo@sec.gov;
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C) 2007 NWD Investment Management, Inc. All rights reserved.
PR-INT 2/07
OPTIMAL ALLOCATIONS Series
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE GROWTH
(FORMERLY GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE)
GARTMORE OPTIMAL ALLOCATIONS FUND: GROWTH
(FORMERLY GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE)
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
OPTIMAL ALLOCATIONS Series
These risk-based, diversified Funds feature significant allocations to specialty as well as core asset classes and may provide the opportunity for higher risk-adjusted returns than those provided by traditional asset allocation programs.
FUND AND CLASS TICKER ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Defensive Class A GODAX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Defensive Class B GODBX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Defensive Class C GODCX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Defensive Class R GODRX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Defensive Institutional Class GODIX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Defensive Institutional Service Class GODSX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Class A GMAAX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Class B GMABX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Class C GMACX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Class R GMRRX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Institutional Class GMAIX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Institutional Service Class GAMSX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Growth Class A GMMAX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Growth Class B GMMBX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Growth Class C GMMCX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Growth Class R GAGRX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Growth Institutional Class GMMIX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Moderate Growth Institutional Service Class GAASX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Growth Class A GVAAX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Growth Class B GVABX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Growth Class C GAACX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Growth Class R GAARX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Growth Institutional Class GAAIX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Growth Institutional Service Class GVISX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Specialty Class A GASAX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Specialty Class B GASBX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Specialty Class C GAMCX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Specialty Class R GASRX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Specialty Institutional Class GASIX ---------------------------------------------------------------------------------------- Gartmore Optimal Allocations Fund: Specialty Institutional Service Class GAISX ---------------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 SECTION 1: FUND SUMMARIES
AND PERFORMANCE
Gartmore Optimal Allocations Fund: Defensive
Gartmore Optimal Allocations Fund: Moderate
Gartmore Optimal Allocations Fund: Moderate Growth
Gartmore Optimal Allocations Fund: Growth
Gartmore Optimal Allocations Fund: Specialty
16 SECTION 2: FUND DETAILS
Additional Information about Investments,
Investment Strategies and Risks
17 SECTION 3: FUND MANAGEMENT
Investment Adviser and Subadviser
Portfolio Management
Multi-Manager Structure
19 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
31 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other Tax-
Deferred Accounts
Backup Withholding
33 SECTION 6: FINANCIAL HIGHLIGHTS
37 APPENDIX: DESCRIPTION OF UNDERLYING
INVESTMENTS
|
GARTMORE OPTIMAL ALLOCATIONS SERIES | 1
OPTIMAL ALLOCATIONS Series
INTRODUCTION TO THE GARTMORE OPTIMAL ALLOCATIONS FUNDS
THIS PROSPECTUS PROVIDES INFORMATION ABOUT THE FIVE GARTMORE OPTIMAL ALLOCATIONS FUNDS (INDIVIDUALLY, "OPTIMAL FUND" OR "FUND" AND COLLECTIVELY, "OPTIMAL FUNDS" OR "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"). THE OPTIMAL FUNDS ARE DESIGNED TO PROVIDE BROADLY DIVERSIFIED INVESTMENT OPTIONS ACROSS A RANGE OF RISK LEVELS. EACH OPTIMAL FUND IS A "FUND OF FUNDS" THAT INVESTS PRIMARILY IN A COLLECTION OF OTHER MUTUAL FUNDS REPRESENTING A VARIETY OF ASSET CLASSES.
Gartmore Optimal Allocations Fund: Defensive Gartmore Optimal Allocations Fund: Moderate Gartmore Optimal Allocations Fund: Moderate Growth Gartmore Optimal Allocations Fund: Growth Gartmore Optimal Allocations Fund: Specialty
THE OPTIMAL FUNDS ARE PRIMARILY INTENDED TO PROVIDE A SOLUTION FOR INVESTORS SEEKING:
o to achieve their financial objectives through a professionally developed asset allocation program and
o to maximize long-term total returns while targeting specific levels of risk through broad diversification among several asset classes, both traditional and specialty in nature.
To decide which of these Optimal Funds may be appropriate for your investment program, you should consider your personal investment objectives and financial circumstances, the length of time until you need your money and the amount of risk you are comfortable assuming. The Optimal Funds are not intended for all investors.
AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT ANY OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FPR ANY PERIOD OF TIME.
Each Funds investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
Each Optimal Fund has six different share classes--Class A, Class B, Class C, Class R, Institutional Service Class and Institutional Class. An investment in any share class of an Optimal Fund represents an investment in the same assets of the Optimal Fund. However, the fees, sales charges and expenses for each share class are different. The different share classes simply let you choose the cost structure that is right for you. The fees and expenses for each of the Optimal Funds are set forth in the Fund Summaries.
Although each Fund is currently managed by Gartmore Mutual Fund Capital Trust (the "Adviser"), each Fund may employ a "multi-manager" structure, which means that the Adviser, as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interests and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies and marketing materials related to them will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE
INVESTMENT OBJECTIVES
Each Optimal Fund seeks to maximize total investment return for a given level of risk.
PRINCIPAL STRATEGIES
The Optimal Funds aim to provide diversification across varying blends of traditional asset classes--such as U.S. stocks, international stocks, U.S. bonds and short-term investments, and "Specialty Asset" classes--such as stocks of specific market sectors, emerging market stocks, international bonds, real estate investment trusts ("REITs"), commodity-linked instruments and alternative strategies--by investing in a professionally selected mix of underlying mutual funds offered by Gartmore Mutual Funds as well as unaffiliated mutual funds and exchange-traded funds (each, an "Underlying Fund" or collectively, "Underlying Funds"). Depending on its target risk level and continuing or anticipated economic and/or market conditions, each Optimal Fund invests different amounts in these asset classes and Underlying Funds.
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE
The Defensive Fund pursues its objective by seeking to provide maximum real return while attempting to preserve capital. "Real return" means the amount of return realized on an investment when adjusted for inflation or deflation. The Defensive Fund's allocations are weighted towards investments in Specialty Assets, which typically consist of Underlying Funds that invest in a particular market sector or investment strategy, and which may offer the potential for greater returns, but also involve potentially greater risks. Specialty Assets consist of stocks and bonds in most instances, including many that are traded in foreign markets, but also may include commodity-linked derivatives and fixed-income securities backing such instruments and REITs. Specialty Assets may also include Underlying Funds that concentrate in a particular market sector or industry, or those that use strategies such as short-selling of securities to achieve their objectives. The Defensive Fund also invests in bonds and short-term investments to add income and reduce volatility. The Defensive Fund is not specifically a conservative investment option, although it may be appropriate for investors who have a lower tolerance for risk than aggressive investors and who are seeking sustainable real returns as a hedge against possible economic deterioration, including inflation, deflation or rising interest rates.
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE
The Moderate Fund pursues its objective by seeking both growth of capital and income. The Moderate Fund's allocation is weighted toward U.S. stock and Specialty Asset investments, but also includes a substantial portion in bonds and short-term investments to add income and reduce volatility. The Moderate Fund may be appropriate for investors who have a lower tolerance for risk than more aggressive investors and who are seeking both growth and income or those willing to accept moderate short-term price fluctuations in exchange for potentially higher returns over time.
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE GROWTH
(FORMERLY GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE)
The Moderate Growth Fund pursues its objective primarily by seeking growth of capital, but also by seeking income. The Moderate Growth Fund's allocation is significantly weighted toward U.S. stock and Specialty Asset investments, but also includes some bonds and short-term investments to reduce volatility. The Moderate Growth Fund may be appropriate for investors who want to maximize returns over the long-term and who have some tolerance for possible short-term losses.
GARTMORE OPTIMAL ALLOCATIONS FUND: GROWTH
(FORMERLY GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE)
The Growth Fund pursues its objective primarily by seeking growth of capital. The Growth Fund's allocation is heavily weighted toward U.S. stock and Specialty Asset investments. The Growth Fund may be appropriate for investors who are comfortable with substantial risk, who have a long investment time horizon and who want to maximize long-term returns potential and are better able to accept possible significant short-term or even long-term losses.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 3
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY
The Specialty Fund pursues its objective primarily by seeking growth of capital. The Specialty Fund's allocation is heavily weighted towards investments in Specialty Assets. Specialty Assets may offer the potential for greater returns, but also involve potentially greater risks. In most cases, Specialty Assets represent investments in stocks and bonds, including many that are traded in foreign markets, but also may include REITs, commodity-linked derivatives and fixed-income securities backing such instruments. Specialty Assets may also include Underlying Funds that concentrate in a particular market sector or industry, or those that use strategies such as short-selling of securities to achieve their objectives. The Specialty Fund may be appropriate for investors who are comfortable with substantial risk or those who want to maximize long-term returns and who have a high tolerance for possible significant short-term or even long-term losses.
THE OPTIMAL FUNDS ARE GENERALLY NOT APPROPRIATE FOR CONSERVATIVE INVESTORS OR THOSE WITH A SHORT INVESTMENT TIME HORIZON.
The Optimal Funds invest predominantly in Underlying Funds that are actively managed, many by the Adviser or its affiliates. Certain other Underlying Funds are managed in a style that attempts to generally replicate the returns of a particular index. These Underlying Funds invest directly in a wide range of securities in various asset classes. You could invest in an Underlying Fund directly; however, the Optimal Funds offer the added benefits of professional asset allocation and an extra measure of diversification.
The Adviser establishes a target allocation range among different asset classes based on each Optimal Fund's risk profile and individual strategies. Within each target asset class allocation range, the Adviser selects the Underlying Funds, and the percentage of the Fund's assets that will be allocated to each such Underlying Fund. The Adviser reviews the allocations among both asset classes and Underlying Funds on a routine basis. The Adviser may make changes to these allocation ranges from time to time as appropriate given the risk profile and individual strategies of each Optimal Fund and in order to achieve each Optimal Fund's investment objective.
4 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
Listed in the table below are the asset classes in which the Optimal Funds currently may invest and the target allocation ranges for each Optimal Fund that have been established by the Adviser as of February 28, 2007. While this table is intended to provide a depiction of the kinds of securities and the general proportions in which each Optimal Fund currently invests, over time these target asset class allocations are likely to change as economic and/or market conditions warrant in order for each Fund to continue to meet its objective. Even where an established target allocation ranges themselves do not change, actual allocations may vary from an established target over the short term. Until a target allocation range is itself changed, day-to-day market activity may cause a Fund's asset allocations to "drift" from the target. Under ordinary circumstances, the Adviser will rebalance the assets of each Optimal Fund each quarter in order to conform its actual allocations to the target allocations applicable at that time. THE OPTIMAL FUNDS DO NOT NECESSARILY INVEST IN EVERY ASSET CLASS, AND THE OPTIMAL FUNDS RESERVE THE RIGHT TO CHANGE THE TARGET ALLOCATION RANGES AT ANY TIME AND WITHOUT NOTICE. FOR FUTURE INFORMATION ABOUT ASSET CLASS ALLOCATIONS, PLEASE REVIEW THE OPTIMAL FUNDS' ANNUAL AND SEMI-ANNUAL REPORTS.
ASSET CLASSES TARGET ALLOCATION RANGES+
MODERATE
DEFENSIVE MODERATE GROWTH GROWTH SPECIALTY
--------------------------------------------------------------------------------------------------------------
U.S. STOCKS 0% 10% - 25% 20% - 35% 20% - 40% 0%
U.S. LARGE CAP STOCKS 0% 5% - 15% 10% - 20% 15% - 30% 0%
(CONSISTS OF UNDERLYING FUNDS THAT
GENERALLY INVEST IN COMPANIES WITH MARKET
CAPITALIZATIONS SIMILAR TO COMPANIES
IN THE STANDARD & POOR'S 500 INDEX.)
--------------------------------------------------------------------------------------------------------------
U.S. SMALL/MID-CAP STOCKS 0% 5% - 10% 5% - 15% 5% - 15% 0%
(CONSISTS OF UNDERLYING FUNDS THAT
GENERALLY INVEST IN COMPANIES WITH MARKET
CAPITALIZATIONS SIMILAR TO COMPANIES
IN THE RUSSELL 2000 INDEX OR THE
RUSSELL MIDCAP INDEX.)
--------------------------------------------------------------------------------------------------------------
INTERNATIONAL STOCKS 0% 5% - 10% 5% - 15% 5% - 10% 0%
--------------------------------------------------------------------------------------------------------------
BONDS AND SHORT-TERM
INVESTMENTS 30% - 40% 20% - 30% 5% - 15% 0% - 5% 0-5%%
--------------------------------------------------------------------------------------------------------------
SPECIALTY ASSETS 60% - 70% 40% - 60% 45% - 65% 50% - 70% 95% - 100%
(CONSISTS OF UNDERLYING FUNDS THAT INVEST
IN A PARTICULAR MARKET SECTOR OR
SPECIALIZED INVESTMENT STRATEGY.)
--------------------------------------------------------------------------------------------------------------
|
Another way of describing the target asset class allocations for the Optimal Funds is as follows:
MODERATE
DEFENSIVE MODERATE GROWTH GROWTH SPECIALTY
--------------------------------------------------------------------------------------------------------------
OVERALL TARGET ALLOCATIONS+
U.S. AND INTERNATIONAL STOCKS++ 40% 60% 80% 96% 96%
--------------------------------------------------------------------------------------------------------------
BONDS AND SHORT-TERM INVESTMENTS++ 60% 40% 20% 4% 4%
|
+ As of February 28, 2007. The Optimal Funds reserve the right to change the target allocation ranges at any time and without notice.
++ Includes Underlying Fund investments considered to be "Specialty Assets."
GARTMORE OPTIMAL ALLOCATIONS SERIES | 5
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
PRINCIPAL RISKS
None of the Optimal Funds can guarantee that it will achieve its investment objective.
As with any fund, the value of each Optimal Fund's investments--and therefore, the value of each Optimal Fund's shares--may fluctuate. These changes may occur because of the following risks:
RISKS ASSOCIATED WITH THE OPTIMAL FUNDS
ASSET ALLOCATION RISK - Each Optimal Fund is subject to different levels and combinations of risk, based on its actual allocation among the various asset classes and Underlying Funds. Each Optimal Fund will be affected to varying degrees by stock and bond market risks, among others. Each Optimal Fund invests a significant proportion of its respective assets in Specialty Assets, which may involve riskier types of securities or investments than those offered by other asset classes. The potential impact of the risks related to an asset class depends on the size of the Optimal Fund's investment allocation to it.
PERFORMANCE RISK - Each Optimal Fund's investment performance is directly tied to the performance of the Underlying Funds in which each Optimal Fund invests. If one or more of the Underlying Funds fails to meet its investment objective, the Optimal Funds' performance could be negatively affected. There can be no assurance that any Optimal Fund or Underlying Fund will achieve its investment objective.
RISKS ASSOCIATED WITH THE UNDERLYING FUNDS
The following are risks applicable to the Underlying Funds and their corresponding asset classes.
RISKS ASSOCIATED WITH STOCKS
STOCK MARKET RISK - refers to the possibility that an Underlying Fund could lose value if the individual stocks in which the Underlying Fund has invested and/or the overall stock markets in which those stocks trade decline. Individual stocks and overall stock markets may experience short-term volatility (price fluctuation) as well as extended periods of decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small- or large-cap stocks, or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events and the fluctuation of other stock markets around the world.
MID-CAP AND SMALL-CAP RISK - Investments in small and mid-sized companies may involve greater risk than investments in larger, more established companies because their stocks are usually less stable in price and less liquid. To the extent an Underlying Fund invests in stocks of small and mid-sized companies, the Underlying Fund may be subject to increased risk. Small-cap companies in the technology and biotechnology industries may be especially subject to abrupt or erratic price movements.
CONCENTRATION RISK - the risk that investing in a select group of securities could subject an Underlying Fund to greater risk of loss and could cause its returns to be significantly more volatile than broad-based market indices and other more diversified mutual funds due to the market movement of a particular industry or industries. Some of the Underlying Funds invest 25% or more of their total assets in a group of companies in one or more industry groups.
To the extent that an Underlying Fund concentrates its securities in one or more sectors or industries, the Underlying Fund may be especially susceptible to factors affecting those industries, including:
o government regulation;
o economic cycles;
o rapid change in products or services or
o competitive pressures.
INITIAL PUBLIC OFFERING RISK - availability of IPOs may be limited and an Underlying Fund may not be able to buy any shares at the offering price, or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
REIT AND REAL ESTATE RISK - involves the risks that are associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds and unexpected vacancies of properties. REITs that invest in real estate mortgages are also subject to prepayment risk. To the extent an Underlying Fund invests in REITs, the Underlying Fund may be subject to these risks.
SHORT-SALES RISK - An Underlying Fund may sell a security it does not own in the hope of buying the same security at a later date at a lower price. The Underlying Fund is required to borrow the security to deliver it to the buyer and is obligated to return the security to the lender at a later date. Short sales involve the risk that the price of the security sold short increases from the time the security is sold short to the date the Underlying Fund purchases the security to replace the borrowed security. Any such
6 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
loss is increased by the amount of the premium or interest the Underlying Fund must pay to the lender of the security. Likewise, any gain will be decreased by the amount of premium or interest the Underlying Fund must pay to the lender of the security. When a cash dividend is declared on a security for which the Underlying Fund has a short position, it incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security. However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Underlying Fund's unrealized gain or reducing the Underlying Fund's unrealized loss on its short-sale transaction. The Underlying Fund is also required to segregate other assets on its books to cover its obligation to return the security to the lender which means that those other assets may not be available to meet the Underlying Fund's needs for immediate cash or other liquidity.
An Underlying Fund's performance may also suffer losses if it is required to close out a short position earlier than it had intended. This would occur if the securities lender required the Underlying Fund to deliver the securities the Underlying Fund borrowed prior to the end of the term of the short sale and the Underlying Fund was unable to borrow the securities from another securities lender.
RISKS ASSOCIATED WITH INTERNATIONAL SECURITIES
FOREIGN SECURITIES RISK -foreign securities may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve the following risks in addition to those of U.S. investments:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities and the possible seizure, nationalization or expropriation of the foreign issuer or foreign deposits (in which the Underlying Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls.
The Optimal Funds may be subject to the additional risks of foreign securities to the extent that an Underlying Fund invests in foreign securities. To the extent that an Underlying Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries may have unstable governments, more volatile currencies and less established markets.
RISKS ASSOCIATED WITH BONDS AND SHORT-TERM INVESTMENTS
CREDIT RISK - the risk that the issuer of a debt security will not make required interest payments and/or principal repayments when they are due. In addition, if an issuer's financial condition changes, the ratings on the issuer's debt securities may be lowered, which could negatively affect the prices of the securities an Underlying Fund owns.
EXTENSION RISK - the risk that principal repayments will not occur as quickly as anticipated, causing the expected maturity of a security to increase. Rapidly rising interest rates may cause prepayments to occur more slowly than expected, thereby lengthening the maturity of the securities held by the Underlying Fund and making their prices more sensitive to rate changes and more volatile.
INFLATION RISK - the risk that prices of existing fixed-rate debt securities will decline due to inflation or the threat of inflation. The income produced by these securities is worth less when prices for goods and services rise. To compensate for this loss of purchasing power, the securities trade at lower prices. Inflation also reduces the purchasing power of any income you receive from an Underlying Fund.
INTEREST RATE RISK - the risk that the value of debt securities held by an Underlying Fund may decrease when market interest rates rise. In general, prices of debt securities decline when interest rates rise and increase when interest rates fall. Typically, the longer the maturity of a debt security, the more sensitive the debt security's price will be to interest rate changes.
LOWER-RATED SECURITIES RISK - refers to the possibility that an Underlying Fund's investments in high-yield bonds (commonly referred to as "junk bonds") and other lower-rated securities will subject the Underlying Fund to substantial risk of loss. Issuers of these securities are generally considered to be less financially secure and less able to repay interest and principal than issuers of investment-grade securities. Prices of high-yield bonds tend to be very volatile. These securities are less liquid than investment-grade debt securities and may be difficult to price or sell, particularly in times of negative sentiment toward high-yield securities. The Underlying Fund's investments in lower-rated securities may involve the following specific risks:
o greater risk of loss due to default because of the increased likelihood that adverse economic or company specific events will make the issuer unable to pay interest and/or principal when due;
o wider price fluctuations due to changing interest rates and/or adverse economic and business developments and
o greater risk of loss due to declining credit quality.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 7
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
PREPAYMENT RISK - as interest rates decline, debt issuers may repay or refinance their loans or obligations earlier than anticipated. The issuers of mortgage- and asset-backed securities may, therefore, repay principal in advance. This forces an Underlying Fund to reinvest the proceeds from the principal prepayments at lower rates, which reduces the Underlying Fund's income.
In addition, changes in prepayment levels can increase the volatility of prices and yields on mortgage- and asset-backed securities. If an Underlying Fund pays a premium (a price higher than the principal amount of the bond) for a mortgage- or asset- backed security and that security is prepaid, the Underlying Fund may not recover the premium, resulting in a capital loss.
TIPS BOND RISK - TIPS are fixed-income securities issued by the U.S. Treasury that are designed to provide inflation protection to investors. TIPS are income-generating instruments whose interest and principal payments are adjusted for inflation. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index. A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase. Because of this inflation adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds. While TIPS may provide investors with a hedge against inflation, in the event of deflation, in which prices decline over time, the principal and income of inflation-protected bonds would likely decline in price, resulting in losses to the Underlying Fund.
ADDITIONAL RISKS THAT MAY AFFECT THE OPTIMAL FUNDS
DERIVATIVES RISK - the risk that the use of derivative securities could disproportionately increase losses and/or reduce opportunities for gains when security prices, currency rates or interest rates change in unexpected ways. Some Underlying Funds may invest in derivatives, primarily futures and options on futures.
Derivatives investing involves several different risks, including the risk that:
o the other party in the derivatives contract may fail to fulfill that party's obligations;
o the use of derivatives may reduce liquidity and make the Underlying Fund harder to value, especially in declining markets;
o the Underlying Fund may suffer disproportionately heavy losses relative to the amount of assets it has invested in derivative contracts and
o changes in the value of the derivative contracts or other hedging instruments may not match or fully offset changes in the value of the hedged portfolio securities, thereby failing to achieve the original purpose for using the derivatives.
EVENT RISK - the risk that a corporate event such as a restructuring, merger, leveraged buyout, takeover, or similar action may cause a decline in market value or credit quality of the corporation's stocks or bonds due to factors including an unfavorable market response or a resulting increase in the company's debt. Added debt may significantly reduce the credit quality and market value of a company's bonds.
NON-DIVERSIFIED FUND RISK - certain Underlying Funds may be non-diversified, meaning they may hold larger positions in fewer securities than other funds. As a result, a single security's increase or decrease in value may have a greater impact on the Underlying Fund's value and total return.
REDEMPTION FEE RISK - certain unaffiliated Underlying Funds may charge redemption fees to shareholders who redeem their Underlying Fund shares within a specified period of time following the purchase of such shares. Ordinarily, a mutual fund that imposes redemption fees does so in order to deter investors from engaging in excessive or short-term trading, often referred to as "market timing," and to reimburse it for transaction costs borne by other fund shareholders on account of market timing activity. The Optimal Funds do not intend to engage in market timing in Underlying Fund shares. However, each Optimal Fund will place purchase and redemption orders in shares of Underlying Funds pursuant to an established asset allocation model in response to daily purchases and redemptions of such Optimal Fund's own shares, to conduct periodic rebalancing of the Fund's assets to conform to the established model following periods of market fluctuation, and in response to changes made to an existing asset allocation model itself. While the portfolio manager will attempt to conduct each Optimal Fund's purchase and redemption of Underlying Fund shares in a manner to avoid or minimize subjecting the Optimal Fund to redemption fees, there may be instances where payment of such fees is unavoidable or the portfolio manager is not successful in minimizing their impact.
PORTFOLIO TURNOVER RISK - The managers of some Underlying Funds may engage in active and frequent trading of portfolio securities if the managers believe that this will be beneficial. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Underlying Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Optimal Fund shareholders.
If the value of an Optimal Fund's investments goes down, you may lose money.
8 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both potential risks and potential rewards for each Fund. The bar chart shows how each Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares each Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in each Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
Performance information is not included for the Optimal Allocations Fund:
Defensive because that Fund did not complete one full year of operations as of
the date of this prospectus.
OPTIMAL ALLOCATIONS FUND: MODERATE
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEAR ENDED DECEMBER 31)
[BAR CHART]
2005 2006 --------------- 7.69% 12.40% |
BEST QUARTER: 5.27% - 4TH QTR OF 2006
WORST QUARTER: -1.59% - 2ND QTR OF 2006
OPTIMAL ALLOCATIONS FUND: MODERATE GROWTH
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2005 2006 --------------- 9.62% 14.19% |
BEST QUARTER: 6.54% - 4TH QTR OF 2006
WORST QUARTER: -2.80% - 2ND QTR OF 2006
OPTIMAL ALLOCATIONS FUND: GROWTH
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2005 2006 --------------- 10.22% 15.52% |
BEST QUARTER: 7.84% - 1ST QTR OF 2006
WORST QUARTER: -4.13% - 2ND QTR OF 2006
OPTIMAL ALLOCATIONS FUND: SPECIALTY
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2005 2006 --------------- 10.46% 18.64% |
BEST QUARTER: 9.49% - 1ST QTR OF 2006
WORST QUARTER: -3.87% - 1ST QTR OF 2005
After-tax returns are shown in the tables on the following page for Class A shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 9
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
SINCE INCEPTION
1 YEAR (JUNE 29, 2004)
---------------------------------------------------------------------------------
Class A shares - Before Taxes 5.93% 9.36%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 4.65% 7.79%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions and
Sales of Shares 4.07% 7.14%
---------------------------------------------------------------------------------
Class B shares - Before Taxes 6.58% 9.79%
---------------------------------------------------------------------------------
Class C shares - Before Taxes 10.64% 10.98%
---------------------------------------------------------------------------------
Class R shares - Before Taxes 12.05% 11.38%
---------------------------------------------------------------------------------
Institutional Service Class shares - Before Taxes 12.78% 12.02%
---------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 12.68% 12.07%
---------------------------------------------------------------------------------
S&P 500(R) Index(2) 15.79% 11.14%
---------------------------------------------------------------------------------
Moderate Composite Index(3) 13.22% 10.68%
---------------------------------------------------------------------------------
|
OPTIMAL ALLOCATIONS FUND: MODERATE GROWTH
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR (JUNE 29, 2004)
---------------------------------------------------------------------------------
Class A shares - Before Taxes 7.61% 11.01%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 6.31% 9.31%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions and
Sales of Shares 5.21% 8.51%
---------------------------------------------------------------------------------
Class B shares - Before Taxes 8.40% 11.82%
---------------------------------------------------------------------------------
Class C shares - Before Taxes 12.43% 12.81%
---------------------------------------------------------------------------------
Class R shares - Before Taxes 13.71% 13.26%
---------------------------------------------------------------------------------
Institutional Service Class shares - Before Taxes 14.47% 13.88%
---------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 14.46% 13.94%
---------------------------------------------------------------------------------
S&P 500(R) Index(2) 15.79% 11.14%
---------------------------------------------------------------------------------
Moderate Growth Composite Index(3) 13.22% 12.04%
---------------------------------------------------------------------------------
|
OPTIMAL ALLOCATIONS FUND: GROWTH
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR (JUNE 29, 2004)
---------------------------------------------------------------------------------
Class A shares - Before Taxes 8.83% 12.19%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 7.36% 10.43%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions and
Sales of Shares 6.16% 9.56%
---------------------------------------------------------------------------------
Class B shares - Before Taxes 9.68% 12.93%
---------------------------------------------------------------------------------
Class C shares - Before Taxes 13.67% 13.94%
---------------------------------------------------------------------------------
Class R shares - Before Taxes 15.01% 14.38%
---------------------------------------------------------------------------------
Institutional Service Class shares - Before Taxes 15.69% 14.96%
---------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 15.85% 15.09%
---------------------------------------------------------------------------------
S&P 500(R) Index(2) 15.79% 11.14%
---------------------------------------------------------------------------------
Growth Composite Index(3) 17.91% 13.61%
---------------------------------------------------------------------------------
|
OPTIMAL ALLOCATIONS FUND: SPECIALTY
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR (JUNE 29, 2004)
---------------------------------------------------------------------------------
Class A shares -Before Taxes 11.79% 14.34%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions 10.37% 12.70%
---------------------------------------------------------------------------------
Class A shares - After Taxes on Distributions and
Sales of Shares 7.92% 11.44%
---------------------------------------------------------------------------------
Class B shares - Before Taxes 12.76% 15.28%
---------------------------------------------------------------------------------
Class C shares - Before Taxes 16.77% 16.21%
---------------------------------------------------------------------------------
Class R shares - Before Taxes 18.32% 16.79%
---------------------------------------------------------------------------------
Institutional Service Class shares - Before Taxes 18.84% 17.29%
---------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 18.99% 17.43%
---------------------------------------------------------------------------------
S&P 500(R) Index(2) 15.79% 11.14%
---------------------------------------------------------------------------------
Specialty Composite Index(3) 17.91% 14.52%
---------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 Each Fund is compared to the actual returns of the S&P 500 Index, a broad-based index. The S&P 500 Index is an unmanaged, market capitalization-weighted index of 500 widely held stocks of large-cap U.S. companies that gives a broad look at how the stock prices of those companies have performed. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
3 Each Fund is also compared to a Composite Index, which is a hypothetical combination of broad-based indexes. These Composite Indexes do not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Composite Indexes would be lower. Individuals cannot invest directly in a Composite Index. The components of the respective Composite Indexes and their weightings are as follows:
o MODERATE COMPOSITE INDEX: 40% Standard and Poor's (S&P) 500(R) Index, 40% Lehman Brothers (LB) U.S. Aggregate Bond Index and 20% Morgan Stanley Capital International Europe, Australasia and Far East (MSCI EAFE(R)) Index.
o MODERATE GROWTH COMPOSITE INDEX: 60% S&P 500(R) Index, 20% LB U.S.
Aggregate Index and 20% MSCI EAFE(R) Index.
o GROWTH COMPOSITE INDEX: 70% S&P 500(R) Index, 25% MSCI EAFE(R) Index and
5% LB U.S. Aggregate Index.
o SPECIALTY COMPOSITE INDEX: 70% S&P 500(R) Index and 30% MSCI EAFE(R)
Index.
10 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
FEES AND EXPENSES
These tables describe the direct fees and expenses you may pay if you buy and hold shares of the Optimal Funds, depending on the share class you select. These tables also reflect the proportion of the Underlying Funds' expenses you may indirectly pay through ownership of shares of the Optimal Funds. See "Indirect Expenses Paid by the Funds" below.
DEFENSIVE FUND
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
--------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
--------------------------------------------------------------------------------------------------------------------------
DIRECT ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the
Fund's investments professionally
managed) 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
--------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1)
Fees (paid from Fund assets to cover
the cost of sales, promotions and
other distribution activities, as
well as certain shareholder
servicing costs) 0.25% 1.00% 1.00% 0.50% None None
--------------------------------------------------------------------------------------------------------------------------
Other Expenses(6) 2.78% 2.73% 2.73% 2.93% 2.73% 2.73%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES+ 3.18% 3.88% 3.88% 3.58% 2.88% 2.88%
--------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense
Reimbursement 2.63% 2.63% 2.63% 2.63% 2.63% 2.63%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES (AFTER
WAIVERS/REIMBURSEMENTS)(7) 0.55% 1.25% 1.25% 0.95% 0.25% 0.25%
--------------------------------------------------------------------------------------------------------------------------
ACQUIRED FUND (I.E., INDIRECT ANNUAL
UNDERLYING FUND) OPERATING EXPENSES(8) 0.74% 0.74% 0.74% 0.74% 0.74% 0.74%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT AND ACQUIRED FUND
ANNUAL OPERATING EXPENSES 1.29% 1.99% 1.99% 1.69% 0.99% 0.99%
--------------------------------------------------------------------------------------------------------------------------
|
GARTMORE OPTIMAL ALLOCATIONS SERIES | 11
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
--------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
--------------------------------------------------------------------------------------------------------------------------
DIRECT ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed) 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
--------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other
distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
--------------------------------------------------------------------------------------------------------------------------
Other Expenses(6) 0.41% 0.39% 0.39% 0.59% 0.47% 0.39%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES 0.81% 1.54% 1.54% 1.24% 0.62% 0.54%
--------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense
Reimbursement 0.29% 0.29% 0.29% 0.29% 0.29% 0.29%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES (AFTER
WAIVERS/REIMBURSEMENTS)(7) 0.52% 1.25% 1.25% 0.95% 0.33% 0.25%
--------------------------------------------------------------------------------------------------------------------------
ACQUIRED FUND (I.E., INDIRECT ANNUAL
UNDERLYING FUND) OPERATING EXPENSES(8) 0.97% 0.97% 0.97% 0.97% 0.97% 0.97%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT AND ACQUIRED FUND
ANNUAL OPERATING EXPENSES 1.49% 2.22% 2.22% 1.92% 1.30% 1.22%
--------------------------------------------------------------------------------------------------------------------------
|
MODERATE GROWTH FUND
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed
upon purchases (as a percentage of
offering price) 5.75%(2) None None None None None
--------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
--------------------------------------------------------------------------------------------------------------------------
DIRECT ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed) 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
--------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other
distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
--------------------------------------------------------------------------------------------------------------------------
Other Expenses(6) 0.47% 0.45% 0.45% 0.65% 0.56% 0.45%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES 0.87% 1.60% 1.60% 1.30% 0.71% 0.60%
--------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense
Reimbursement 0.35% 0.35% 0.35% 0.35% 0.35% 0.35%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES (AFTER
WAIVERS/REIMBURSEMENTS)(7) 0.52% 1.25% 1.25% 0.95% 0.36% 0.25%
--------------------------------------------------------------------------------------------------------------------------
ACQUIRED FUND (I.E., INDIRECT ANNUAL
UNDERLYING FUND) OPERATING EXPENSES(8) 1.07% 1.07% 1.07% 1.07% 1.07% 1.07%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT AND ACQUIRED FUND
ANNUAL OPERATING EXPENSES 1.59% 2.32% 2.32% 2.02% 1.43% 1.32%
--------------------------------------------------------------------------------------------------------------------------
|
12 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed upon
purchases (as a percentage of offering
price) 5.75%(2) None None None None None
--------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
--------------------------------------------------------------------------------------------------------------------------
DIRECT ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed) 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
--------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other
distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
--------------------------------------------------------------------------------------------------------------------------
Other Expenses(6) 0.96% 0.95% 0.95% 1.15% 1.05% 0.95%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL
FUND OPERATING EXPENSES 1.36% 2.10% 2.10% 1.80% 1.20% 1.10%
--------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/Expense
Reimbursement 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES (AFTER
WAIVERS/REIMBURSEMENTS)(7) 0.51% 1.25% 1.25% 0.95% 0.35% 0.25%
--------------------------------------------------------------------------------------------------------------------------
ACQUIRED FUND (I.E., INDIRECT ANNUAL
UNDERLYING FUND) OPERATING EXPENSES(8) 1.18% 1.18% 1.18% 1.18% 1.18% 1.18%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT AND ACQUIRED FUND ANNUAL
OPERATING EXPENSES 1.69% 2.43% 2.43% 2.13% 1.53% 1.43%
--------------------------------------------------------------------------------------------------------------------------
|
SPECIALTY FUND
INSTITUTIONAL
SHAREHOLDER FEES (PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS R SERVICE CLASS INSTITUTIONAL
YOUR INVESTMENT)(1) SHARES SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) imposed upon
purchases (as a percentage of offering
price) 5.75%(2) None None None None None
--------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load)
imposed upon redemptions (as a
percentage of offering or sale price,
whichever is less) None(3) 5.00%(4) 1.00%(5) None None None
--------------------------------------------------------------------------------------------------------------------------
DIRECT ANNUAL FUND OPERATING
EXPENSES (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------
Management Fees (paid to have the Fund's
investments professionally managed) 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
--------------------------------------------------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees
(paid from Fund assets to cover the cost
of sales, promotions and other
distribution activities, as well as
certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None
--------------------------------------------------------------------------------------------------------------------------
Other Expenses(6) 0.35% 0.34% 0.34% 0.54% 0.43% 0.34%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL
FUND OPERATING EXPENSES 0.75% 1.49% 1.49% 1.19% 0.58% 0.49%
--------------------------------------------------------------------------------------------------------------------------
Amount of Fee Waiver/ Expense
Reimbursement 0.24% 0.24% 0.24% 0.24% 0.24% 0.24%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT ANNUAL FUND
OPERATING EXPENSES (AFTER
WAIVERS/REIMBURSEMENTS)(7) 0.51% 1.25% 1.25% 0.95% 0.34% 0.25%
--------------------------------------------------------------------------------------------------------------------------
ACQUIRED FUND (INDIRECT ANNUAL
UNDERLYING FUND) OPERATING EXPENSES(8) 1.31% 1.31% 1.31% 1.31% 1.31% 1.31%
--------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT AND ACQUIRED FUND ANNUAL
OPERATING EXPENSES 1.82% 2.56% 2.56% 2.26% 1.65% 1.56%
--------------------------------------------------------------------------------------------------------------------------
|
GARTMORE OPTIMAL ALLOCATIONS SERIES | 13
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may charge a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 1.00% will apply to
redemptions of Class A shares if purchased without sales charges and for
which a finders fee was paid. Section 4, Investing with Gartmore Funds:
Purchasing Class A Shares without a Sales Charge.
4 A CDSC beginning at 5% and declining to 1% is charged if you sell Class B shares within six years after purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged if you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees were: 0.02%, 0.02%, 0.01% and 0.01% for Class A, 0.20%, 0.20%, 0.20% and 0.20% for Class R and 0.08%, 0.11%, 0.10% and 0.09% for Institutional Service Class shares of the Moderate, Moderate Growth, Growth and Specialty Funds, respectively. Administrative services fees for the Defensive Fund are estimated to be 0.05%, 0.20% and 0.15% for Class A, Class R and Institutional Service Class shares, respectively, during the current fiscal year. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time because the Fund does not currently sell its shares to intermediaries that charge the full amount permitted.
7 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses in each share class to 0.25% at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, the "Total Direct Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 0.75% for Class A shares, 1.00% for Class R shares and 0.50% for Institutional Service Class shares before the Adviser would be required to further limit each Optimal Fund's expenses.
8 Because the Optimal Funds invest primarily in mutual funds, the Optimal Funds are shareholders of those Underlying Funds. The Underlying Funds do not charge the Optimal Funds any sales charge for buying or selling shares. However, the Optimal Funds indirectly pay a portion of the Underlying Funds' operating expenses, including management fees. These expenses are deducted from the Underlying Funds before their share prices are calculated and are in addition to the fees and expenses described in the fee tables above. Actual indirect expenses vary depending on how the Optimal Funds' assets are spread among the Underlying Funds.
+ Expenses are based on the Defensive Fund's projected average net assets for the current fiscal year.
14 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 1 OPTIMAL ALLOCATIONS SERIES FUND SUMMARIES AND PERFORMANCE (CONT.)
This Example is intended to help you compare the cost of investing in an Optimal Fund with cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each of the Optimal Funds for the time periods indicated and then sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
DEFENSIVE FUND
--------------------------------------------------------------------------------
Class A shares* $ 699 $ 1,473
--------------------------------------------------------------------------------
Class B shares $ 702 $ 1,457
--------------------------------------------------------------------------------
Class C shares $ 302 $ 1,157
--------------------------------------------------------------------------------
Class R shares $ 172 $ 1,070
--------------------------------------------------------------------------------
Institutional Service Class shares $ 101 $ 864
--------------------------------------------------------------------------------
Institutional Class shares $ 101 $ 864
--------------------------------------------------------------------------------
MODERATE FUND
--------------------------------------------------------------------------------
Class A shares* $ 718 $ 1,076 $ 1,459 $ 2,527
--------------------------------------------------------------------------------
Class B shares $ 725 $ 1,054 $ 1,510 $ 2,560
--------------------------------------------------------------------------------
Class C shares $ 325 $ 754 $ 1,310 $ 2,824
--------------------------------------------------------------------------------
Class R shares $ 195 $ 663 $ 1,158 $ 2,522
--------------------------------------------------------------------------------
Institutional Service Class shares $ 132 $ 474 $ 838 $ 1,865
--------------------------------------------------------------------------------
Institutional Class shares $ 124 $ 449 $ 796 $ 1,777
--------------------------------------------------------------------------------
MODERATE GROWTH FUND
--------------------------------------------------------------------------------
Class A shares* $ 727 $ 1,117 $ 1,531 $ 2,682
--------------------------------------------------------------------------------
Class B shares $ 735 $ 1,096 $ 1,584 $ 2,717
--------------------------------------------------------------------------------
Class C shares $ 335 $ 796 $ 1,384 $ 2,977
--------------------------------------------------------------------------------
Class R shares $ 205 $ 706 $ 1,234 $ 2,680
--------------------------------------------------------------------------------
Institutional Service Class shares $ 146 $ 526 $ 932 $ 2,066
--------------------------------------------------------------------------------
Institutional Class shares $ 134 $ 492 $ 875 $ 1,947
--------------------------------------------------------------------------------
GROWTH FUND
--------------------------------------------------------------------------------
Class A shares* $ 737 $ 1,244 $ 1,776 $ 3,225
--------------------------------------------------------------------------------
Class B shares $ 746 $ 1,231 $ 1,839 $ 3,270
--------------------------------------------------------------------------------
Class C shares $ 346 $ 931 $ 1,639 $ 3,519
--------------------------------------------------------------------------------
Class R shares $ 216 $ 842 $ 1,493 $ 3,239
--------------------------------------------------------------------------------
Institutional Service Class shares $ 156 $ 661 $ 1,194 $ 2,651
--------------------------------------------------------------------------------
Institutional Class shares $ 146 $ 631 $ 1,143 $ 2,550
--------------------------------------------------------------------------------
SPECIALTY FUND
--------------------------------------------------------------------------------
Class A shares* $ 749 $ 1,162 $ 1,599 $ 2,809
--------------------------------------------------------------------------------
Class B shares $ 759 $ 1,145 $ 1,658 $ 2,851
--------------------------------------------------------------------------------
Class C shares $ 359 $ 845 $ 1,458 $ 3,111
--------------------------------------------------------------------------------
Class R shares $ 229 $ 756 $ 1,309 $ 2,818
--------------------------------------------------------------------------------
Institutional Service Class shares $ 169 $ 571 $ 999 $ 2,192
--------------------------------------------------------------------------------
Institutional Class shares $ 159 $ 543 $ 952 $ 2,096
--------------------------------------------------------------------------------
|
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
DEFENSIVE FUND
--------------------------------------------------------------------------------
Class B shares $ 202 $ 1,157
--------------------------------------------------------------------------------
Class C shares $ 202 $ 1,157
--------------------------------------------------------------------------------
MODERATE FUND
--------------------------------------------------------------------------------
Class B shares $ 225 $ 754 $ 1,310 $ 2,560
--------------------------------------------------------------------------------
Class C shares $ 225 $ 754 $ 1,310 $ 2,824
--------------------------------------------------------------------------------
MODERATE GROWTH FUND
--------------------------------------------------------------------------------
Class B shares $ 235 $ 796 $ 1,384 $ 2,717
--------------------------------------------------------------------------------
Class C shares $ 235 $ 796 $ 1,384 $ 2,977
--------------------------------------------------------------------------------
GROWTH FUND
--------------------------------------------------------------------------------
Class B shares $ 246 $ 931 $ 1,639 $ 3,270
--------------------------------------------------------------------------------
Class C shares $ 246 $ 931 $ 1,639 $ 3,519
--------------------------------------------------------------------------------
SPECIALTY FUND
--------------------------------------------------------------------------------
Class B shares $ 259 $ 845 $ 1,458 $ 2,811
--------------------------------------------------------------------------------
Class C shares $ 259 $ 845 $ 1,458 $ 3,111
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 15
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS, INVESTMENT STRATEGIES AND RISKS
INVESTMENT STRATEGIES -- The Optimal Funds strive to provide shareholders with a high level of diversification across major asset classes primarily through professionally designed, risk-based allocation models and professionally selected investments in the Underlying Funds.
First, the Adviser determines each Optimal Fund's target asset class allocations. The Adviser bases this decision on each Optimal Fund's target risk level, the expected return potential of each asset class, the anticipated risks or volatility of each asset class and similarities or differences in the typical investment cycle of the various asset classes. The Adviser has engaged Ibbotson Associates Advisors LLC, a registered investment adviser and wholly-owned subsidiary of Morningstar, Inc. that provides asset allocation consulting services, to develop recommended target allocations to the asset classes within each Optimal Fund. However, the Adviser ultimately has sole responsibility for determining each Optimal Fund's target allocation range, asset class allocations and its investments in Underlying Funds.
Second, once the asset allocation is determined, the Adviser selects the Underlying Funds. In general, a Fund may not invest in all Underlying Funds identified in the Appendix, but instead may select a limited number of Underlying Funds considered most appropriate for each Optimal Fund's investment objective and target risk level. In selecting Underlying Funds, the Adviser considers a variety of factors in the context of current economic and market conditions, including the Underlying Fund's investment strategy, risk profile and historical performance.
The potential rewards and risks associated with each Optimal Fund depend on both the asset class allocations and the chosen mix of Underlying Funds. The Adviser periodically reviews target allocation ranges, asset class allocations and continually monitors the mix of Underlying Funds, and will make changes either to the target allocation ranges, asset class allocations, the mix of Underlying Funds, or the Underlying Funds themselves in order to meet the investment objective. There can be no guarantee that any of the Optimal Funds will meet its respective objective.
TEMPORARY INVESTMENTS -- Each of the Optimal Funds intends to be fully invested in accordance with its investment objective and strategies under normal circumstances. However, pending investment of cash balances, or if the Optimal Fund's management believes that business, economic, political or financial conditions warrant, an Optimal Fund may invest without limit in cash or money market equivalents, including: (1) short-term U.S. government securities; (2) certificates of deposit, bankers' acceptances and interest-bearing savings deposits of commercial banks; (3) prime quality commercial paper; (4) repurchase agreements covering any of the securities in which the Optimal Fund may invest directly; and (5) subject to regulatory limits, shares of other investment companies that invest in securities in which the Optimal Fund may invest. Should this occur, an Optimal Fund will not be pursuing its investment objective and may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Optimal Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
16 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Optimal Funds' investment adviser. The Adviser manages the investment of the Optimal Funds' assets and supervises the daily business affairs of the Optimal Funds. The Adviser was organized in 1999 as an investment adviser for mutual funds. The Adviser is part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Fund's respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
The Adviser determines the target allocation ranges and asset allocation for each Fund, selects the appropriate mix of Underlying Funds, monitors the performance and positioning of the Underlying Funds, and also selects and monitors any non-affiliated mutual funds held by the Funds. For these services, each Optimal Fund pays the Adviser an annual management fee based on each Optimal Fund's average daily net assets. This is in addition to the indirect investment management fees that the Optimal Funds pay as shareholders of affiliated Underlying Funds that the Adviser also manages. The Adviser and the Board of Trustees concur that the fees paid to the Adviser are for services in addition to the services provided by the Underlying Funds and do not duplicate those services.
The total aggregate management fee paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of each Fund's average daily net assets and taking into account any applicable waivers, was 0.15%.
The total annual advisory fee that can be paid to the Adviser (as a percentage of each Fund's average daily net assets) is 0.15% for each Optimal Fund.
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreement for the Funds will be available in the Funds' semi-annual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
PORTFOLIO MANAGEMENT
William H. Miller, Senior Portfolio Manager, is the portfolio manager of the Funds and is responsible for the day-to-day management of the allocation of each Fund's assets among the asset classes and Underlying Funds. Mr. Miller joined the Adviser in July 1999. He is also the portfolio manager of the Gartmore Investor Destinations Funds and the Gartmore GVIT Investor Destinations Funds, which are other asset allocation funds advised by NWD Investments. Mr. Miller was the co-portfolio Manager of the Gartmore Nationwide Fund and the Gartmore GVIT Nationwide Fund from September 2000 until April 2006. Prior to joining NWD Investments, Mr. Miller was a Senior Portfolio Manager at Putnam Investments from 1997 to 1999 and Vice President and Assistant Portfolio Manager at Delaware Management Company from 1995 to 1997.
The SAI provides additional information about the portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 17
SECTION 3 FUND MANAGEMENT (CONT.)
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are managed directly by the Adviser, but if a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows the Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of the Funds will obtain favorable results at any given time.
18 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS
CHOOSING A SHARE CLASS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table to the right compares Class A, Class B and Class C shares, which are available to all investors.
Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class shares and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
Before you invest, compare the features of each share class, so that you can choose the class that is right for you. We describe each share class in detail on the following pages. Your financial adviser can help you with this decision.
COMPARING CLASS A, CLASS B AND CLASS C SHARES
CLASSES AND CHARGES POINTS TO CONSIDER
CLASS A SHARES
Front-end sales charge A front-end sales charge means that a portion
up to 5.75% of your initial investment goes toward the
sales charge and is not invested.
Contingent deferred Reduction and waivers of sales charges may be
sales charge (CDSC)(1) available.
Annual service and/or Total annual operating expenses are lower than Class B
12b-1 fee of 0.25% and Class C expenses, which means higher dividends
Administrative services and/or net asset value ("NAV") per share.
fee up to 0.25%
No conversion feature.
No maximum investment amount.
--------------------------------------------------------------------------------
CLASS B SHARES
CDSC up to 5.00% No front-end sales charge means your full
investment immediately goes toward buying
shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines 1% in most years to zero after
six years.
Annual service and/or Total annual operating expenses are higher than Class
12b-1 fee of 1.00% A expenses, which means lower dividends
No administrative and/or NAV per share.
services fee
Automatic conversion to Class A shares after seven
years, which means lower annual expenses in the
future.
Maximum investment amount of $100,000. Larger
investments may be rejected.
--------------------------------------------------------------------------------
CLASS C SHARES
CDSC of 1.00% No front-end sales charge means your full investment
immediately goes toward buying shares.
No reduction of CDSC, but waivers may be available.
The CDSC declines to zero after one year.
Annual service and/or Total annual operating expenses are higher than Class
12b-1 fee of 1.00% A expenses, which means lower dividends and/or
No administrative NAV per share.
services fee
No conversion feature.
Maximum investment amount of $1,000,000(2). Larger
investments may be rejected.
--------------------------------------------------------------------------------
|
1 Unless you are eligible to purchase Class A shares without a sales charge, a CDSC of up to 1.00% may be charged on Class A shares redeemed within 18 months of purchase if you paid no sales charge on the original purchase and a finders fee was paid.
2 This limit was calculated based on a one-year holding period.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 19
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A SHARES
Class A shares may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
-----------------------------------------------------------------------------------
SALES CHARGE AS A PERCENTAGE OF
------------------------------- DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
-----------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
-----------------------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
-----------------------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
-----------------------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
-----------------------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
-----------------------------------------------------------------------------------
$1 million or more None None None*
-----------------------------------------------------------------------------------
|
* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, CLass B and Class C shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
20 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 1.00% applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason;
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
AMOUNT OF $1 MILLION $4 MILLION $25 MILLION PURCHASE TO $3,999,999 TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 1.00% 0.50% 0.25% -------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the Fund(s) is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70 1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 21
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
----------------------------------------------------------------------------------
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEARS OR MORE
----------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
----------------------------------------------------------------------------------
|
CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the number of Class B shares converted; however, the total dollar value will be the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after purchase, you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The Funds offer Institutional Service Class, Institutional Class and Class R shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires;
o the total expenses of the share class and
CLASS R SHARES
Class R shares ARE AVAILABLE to retirement plans including:
o 401(k) plans;
o 457 plans;
o 403(b) plans;
o profit sharing and money purchase pension plans;
o defined benefit plans;
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial services firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans, having at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts;
o traditional and Roth IRAs;
o Coverdell Education Savings Accounts;
o SEPs and SAR-SEPs;
o SIMPLE IRAs;
o one-person Keogh plans;
o individual 403(b) plans or
o 529 Plan accounts.
22 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o retirement plans for which no third-party administrator receives compensation from the Fund(s);
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors, subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative services fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or services fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Institutional Class and Institutional Service Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
--------------------------------------------------------------------------------
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either
a distribution or service fee)
--------------------------------------------------------------------------------
|
ADMINISTRATIVE SERVICES FEES
Class A, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by the Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual fee of 0.25% for Class A, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial
GARTMORE OPTIMAL ALLOCATIONS SERIES | 23
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278.
FUND TRANSACTIONS--CLASS A, CLASS B AND CLASS C SHARES
All transaction orders must be received by the Funds' agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
24 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' transfer agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Optimal Fund's NAV to receive that day's NAV.
HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
---------------------------------------------------------------------------------------------------------------------------
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND UPON 60 DAYS WRITTEN NOTICE TO SHAREHOLDERS.
THE OFFERING OF SHARES AT ANY TIME.
** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
---------------------------------------------------------------------------------------------------------------------------
THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. Through an authorized
relationships with certain brokers and other financial intermediary. The Distributor has relationships with certain
intermediaries who are authorized to accept purchase, brokers and other financial intermediaries who are
exchange and redemption orders for the Funds. Your authorized to accept purchase, exchange and redemption
transaction is processed at the NAV next calculated after orders for the Funds. Your transaction is processed at the
the Funds' agent or an authorized intermediary receives NAV next calculated after the Funds' agent or an authorized
your order in proper form. intermediary receives your order in proper form.
---------------------------------------------------------------------------------------------------------------------------
BY MAIL. Complete an application and send with a check BY MAIL OR FAX. You may request an exchange or redemption
made payable to: Gartmore Funds. Payment must be made in by mailing or faxing a letter to Gartmore Funds. The letter
U.S. dollars and drawn on a U.S. bank. THE FUNDS DO NOT must include your account number(s) and the name(s) of the
ACCEPT CASH, STARTER CHECKS, THIRD-PARTY CHECKS, Fund(s) you wish to exchange from and to. The letter must
TRAVELERS' CHECKS, CREDIT CARD CHECKS OR MONEY ORDERS. be signed by all account owners. We reserve the right to
request original documents for any faxed requests.
---------------------------------------------------------------------------------------------------------------------------
BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The unless you decline this option on your application. The
Funds follow procedures to confirm that telephone Funds follow procedures to confirm that telephone
instructions are genuine and will not be liable for any instructions are genuine and will not be liable for any
loss, injury, damage or expense that results from loss, injury, damage or expense that results from executing
executing such instructions. The Funds may revoke such instructions. The Funds may revoke telephone
telephone privileges at any time, without notice to privileges at any time, without notice to shareholders. For
shareholders. redemptions, shareholders who own shares in an IRA account
should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made
payable to the shareholder(s) of record will be mailed to
the address of record.
The Funds may record telephone instructions to redeem shares
and may request redemption instructions in writing, signed
by all shareholders on the account.
---------------------------------------------------------------------------------------------------------------------------
ON-LINE. Transactions may be made through the Gartmore ON-LINE. Transactions may be made through the Gartmore
Funds' website. However, the Funds may discontinue on-line Funds' website. However, the Funds may discontinue on-line
transactions of Fund shares at any time. transactions of Fund shares at any time.
---------------------------------------------------------------------------------------------------------------------------
BY BANK WIRE. You may have your bank transmit funds by BY BANK WIRE. The Funds can wire the proceeds of your
federal funds wire to the Funds' custodian bank. (The redemption directly to your account at a commercial bank. A
authorization will be in effect unless you give the Funds voided check must be attached to your application. (The
written notice of its termination.) authorization will be in effect unless you give the Funds
written notice of its termination.)
o if you choose this method to open a new account, you
must call our toll-free number before you wire your o your proceeds typically will be wired to your bank on
investment and arrange to fax your completed the next business day after your order has been
application. processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the
redemption proceeds for this service.
o the wire must be received by 4:00 p.m. in order
to receive the current day's NAV. o your financial institution may also charge a fee for
receiving the wire.
o funds sent outside the U.S. may be subject to higher
fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
---------------------------------------------------------------------------------------------------------------------------
BY AUTOMATED CLEARING HOUSE (ACH). You can fund your BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds
Gartmore Funds' account with proceeds from your bank via can be sent to your bank via ACH on the second business day
ACH on the second business day after your purchase order after your order has been processed. A voided check must be
has been processed. A voided check must be attached to attached to your application. Money sent through ACH should
your application. Money sent through ACH typically reaches reach your bank in two business days. There is no fee for
Gartmore Funds from your bank in two business days. There this service. (The authorization will be in effect unless
is no fee for this service. (The authorization will be in you give the Funds written notice of its termination.)
effect unless you give the Funds written notice of its
termination.) ACH IS NOT AN OPTION FOR EXCHANGES.
---------------------------------------------------------------------------------------------------------------------------
RETIREMENT PLAN PARTICIPANTS should contact their RETIREMENT PLAN PARTICIPANTS should contact their
retirement plan administrator regarding transactions. retirement plan administrator regarding transactions.
Retirement plans or their administrators wishing to Retirement plans or their administrators wishing to conduct
conduct transactions should call our toll-free number. transactions should call our toll-free number. Eligible
Eligible entities or individuals wishing to conduct entities or individuals wishing to conduct transactions in
transactions in Institutional Service Class or Institutional Service Class or Institutional Class shares
Institutional Class shares should call our toll-free should call our toll-free number.
number.
|
GARTMORE OPTIMAL ALLOCATIONS SERIES | 25
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open.
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by a Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Fair Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments, or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that it might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
Investments in other registered mutual funds are valued based on the NAV of those mutual funds, which in turn may use fair value pricing, as discussed in their respective prospectuses. Shares of exchange-traded funds are valued based on the prices at which they trade on the stock exchanges on which thay are listed.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
The Optimal Funds' NAVs are calculated based upon the net asset values of the Underlying Funds in which the Optimal Funds invest. The prospectuses for these Underlying Funds explain the circumstances under which those Underlying Funds will use fair value pricing and the effect of using fair value pricing.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
26 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS B AND CLASS C SHARES To open an account $2,000 (per Fund) To open an IRA account $1,000 (per Fund) Additional investments $100 (per Fund) To start an Automatic Asset Accumulation Plan $1,000 (per Fund) Additional investments (Automatic Asset Accumulation Plan) $50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $50,000 (per Fund) Additional investments No Minimum INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account, and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name;
o date of birth (for individuals);
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities.
Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration;
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Fund, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60 days written notice to shareholders.
Generally, there are no sales charges for exchanges of Class B, Class C, Class R, Institutional Class or Institutional Service Class shares. However,
o if you exchange from Class A shares of a Fund to a fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original purchase is charged.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 27
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund).
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C Shares of the another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically redeem Class A, Class B and Class C shares in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Funds' transfer agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell or, in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or the Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings);
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received.
Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Funds reserve the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Funds different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days;
o the redemption check is made payable to anyone other than the registered shareholder;
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
28 | GARTMORE OPTIMAL ALLOCATIONS SERIES
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or redemptions and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies;
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading, as may be the Underlying Funds that invest in such foreign securities. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high--yield (junk) bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser and its agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you exchange your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the redemption of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares--Share Price.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 29
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you sell or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. Redemption fees are not imposed on redemptions or exchanges from the Gartmore Optimal Allocations Funds. However, other Gartmore Funds into which you may exchange do impose redemption fees as shown below. Please see the prospectus for the Fund into which you may wish to exchange for further information.
--------------------------------------------------------------------------------
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
--------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Technology
and Communications Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
--------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
--------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
--------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
--------------------------------------------------------------------------------
|
30 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 31
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gains distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
32 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 6 GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds'
financial performance for the past five fiscal years or periods ended October
31. Certain information reflects financial results for a single Fund share. The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in a Fund (assuming reinvestment of all
dividends and distributions and no sales charges). Information has been audited
by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial
statements, are included in the Trust's annual reports, which are available upon
request. Information is not included for the Optimal Allocations Fund: Defensive
because the Fund did not commence operations until after October 31, 2006, the
date on which the past fiscal year ended.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.04 0.28 0.32
Year Ended October 31, 2005 $ 10.32 0.28 0.77 1.05
Year Ended October 31, 2006 $ 11.04 0.31 1.12 1.43
-------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 0.24 0.25
Year Ended October 31, 2005 $ 10.25 0.20 0.74 0.94
Year Ended October 31, 2006 $ 10.93 0.22 1.11 1.33
-------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 0.24 0.25
Year Ended October 31, 2005 $ 10.25 0.23 0.74 0.97
Year Ended October 31, 2006 $ 10.93 0.32 1.02 1.34
-------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.03 0.24 0.27
Year Ended October 31, 2005 $ 10.27 0.28 0.73 1.01
Year Ended October 31, 2006 $ 11.02 0.20 1.20 1.40
-------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.04 0.26 0.30
Year Ended October 31, 2005 $ 10.30 0.35 0.71 1.06
Year Ended October 31, 2006 $ 11.04 0.24 1.21 1.45
-------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.05 0.25 0.30
Year Ended October 31, 2005 $ 10.30 0.35 0.72 1.07
Year Ended October 31, 2006 (g) $ 11.04 0.18 1.29 1.47
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
-------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
-------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) - - - $ 10.32 3.20%(e)
Year Ended October 31, 2005 (0.32) (0.01) (0.33) $ 11.04 10.41%
Year Ended October 31, 2006 (0.51) (0.11) (0.62) $ 11.85 13.38%
-------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) - - - $ 10.25 2.60%(e)
Year Ended October 31, 2005 (0.25) (0.01) (0.26) $ 10.93 9.13%
Year Ended October 31, 2006 (0.44) (0.11) (0.55) $ 11.71 12.59%
-------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) - - - $ 10.25 2.60%(e)
Year Ended October 31, 2005 (0.28) (0.01) (0.29) $ 10.93 9.50%
Year Ended October 31, 2006 (0.44) (0.11) (0.55) $ 11.72 12.59%
-------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - - - $ 10.27 2.70%(e)
Year Ended October 31, 2005 (0.25) (0.01) (0.26) $ 11.02 9.94%
Year Ended October 31, 2006 (0.51) (0.11) (0.62) $ 11.80 13.15%
-------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.30 3.00%(e)
Year Ended October 31, 2005 (0.31) (0.01) (0.32) $ 11.04 10.39%
Year Ended October 31, 2006 (0.54) (0.11) (0.65) $ 11.84 13.64%
-------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.30 3.00%(e)
Year Ended October 31, 2005 (0.32) (0.01) (0.33) $ 11.04 10.54%
Year Ended October 31, 2006 (g) (0.54) (0.11) (0.65) $ 11.86 13.74%
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000s) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 1 0.56%(f) 1.06%(f) 12.40%(f) (10.78%)(f) 7.57%
Year Ended October 31, 2005 $ 4,595 0.52% 1.73% 1.88% 0.38% 61.59%
Year Ended October 31, 2006 $ 9,797 0.52% 1.87% 0.79% 1.60% 34.82%
-------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 1 1.25%(f) 0.37%(f) 13.50%(f) (11.88%)(f) 7.57%
Year Ended October 31, 2005 $ 1,269 1.25% 0.65% 2.70% (0.80%) 61.59%
Year Ended October 31, 2006 $ 2,630 1.25% 1.20% 1.54% 0.93% 34.82%
-------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 1 1.25%(f) 0.37%(f) 13.50%(f) (11.88%)(f) 7.57%
Year Ended October 31, 2005 $ 7,648 1.25% 0.72% 2.51% (0.54%) 61.59%
Year Ended October 31, 2006 $ 19,027 1.25% 1.25% 1.54% 0.97% 34.82%
-------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 0.85%(f) 0.77%(f) 12.85%(f) (11.23%)(f) 7.57%
Year Ended October 31, 2005 $ 1 0.81% 2.35% 3.85% (0.37%) 61.59%
Year Ended October 31, 2006 $ 1 0.72% 1.63% 0.75% 1.60% 34.82%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 1 0.40%(f) 1.22%(f) 12.23%(f) (10.61%)(f) 7.57%
Year Ended October 31, 2005 $ 1 0.34% 2.83% 3.93% (0.76%) 61.59%
Year Ended October 31, 2006 $ 1 0.33% 1.99% 0.85% 1.47% 34.82%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 1,030 0.25%(f) 1.37%(f) 12.08%(f) (10.46%)(f) 7.57%
Year Ended October 31, 2005 $ 1,138 0.25% 2.90% 2.94% 0.20% 61.59%
Year Ended October 31, 2006 (g) $ 1 0.25% 1.58% 0.58% 1.25% 34.82%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(e) Not annualized.
(f) Annualized.
(g) Net investment income (loss) is based on average shares outstanding during the period.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 33
SECTION 6 GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE GROWTH FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.02 0.20 0.22
Year Ended October 31, 2005 $ 10.22 0.23 1.04 1.27
Year Ended October 31, 2006 $ 11.21 0.39 1.32 1.71
-------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 0.17 0.17
Year Ended October 31, 2005 $ 10.17 0.18 1.04 1.22
Year Ended October 31, 2006 $ 11.16 0.27 1.33 1.60
-------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 0.17 0.17
Year Ended October 31, 2005 $ 10.17 0.18 1.02 1.20
Year Ended October 31, 2006 $ 11.14 0.34 1.27 1.61
-------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 0.18 0.19
Year Ended October 31, 2005 $ 10.19 0.25 1.01 1.26
Year Ended October 31, 2006 $ 11.21 0.13 1.54 1.67
-------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.02 0.19 0.21
Year Ended October 31, 2005 $ 10.21 0.31 1.00 1.31
Year Ended October 31, 2006 $ 11.23 0.17 1.56 1.73
-------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.03 0.18 0.21
Year Ended October 31, 2005 $ 10.21 0.32 1.00 1.32
Year Ended October 31, 2006 (g) $ 11.23 0.12 1.62 1.74
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
-------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
-------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) - - - $ 10.22 2.10%(e)
Year Ended October 31, 2005 (0.28) - (0.28) $ 11.21 12.77%
Year Ended October 31, 2006 (0.56) (0.15) (0.71) $ 12.21 15.79%
-------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) - - - $ 10.17 1.70%(e)
Year Ended October 31, 2005 (0.23) - (0.23) $ 11.16 12.07%
Year Ended October 31, 2006 (0.50) (0.15) (0.65) $ 12.11 14.91%
-------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) - - - $ 10.17 1.70%(e)
Year Ended October 31, 2005 (0.23) - (0.23) $ 11.14 11.98%
Year Ended October 31, 2006 (0.50) (0.15) (0.65) $ 12.10 14.95%
-------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - - - $ 10.19 1.90%(e)
Year Ended October 31, 2005 (0.24) - (0.24) $ 11.21 12.50%
Year Ended October 31, 2006 (0.55) (0.15) (0.70) $ 12.18 15.55%
-------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.21 2.10%(e)
Year Ended October 31, 2005 (0.29) - (0.29) $ 11.23 13.00%
Year Ended October 31, 2006 (0.58) (0.15) (0.73) $ 12.23 16.06%
-------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.21 2.10%(e)
Year Ended October 31, 2005 (0.30) - (0.30) $ 11.23 13.16%
Year Ended October 31, 2006 (g) (0.58) (0.15) (0.73) $ 12.24 16.05%
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000s) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
-------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 1 0.56%(f) (0.27%)(f) 13.04%(f) (12.75%)(f) 9.79%
Year Ended October 31, 2005 $ 3,419 0.52% 1.13% 2.32% (0.66%) 47.04%
Year Ended October 31, 2006 $ 11,525 0.52% 1.05% 0.85% 0.72% 32.64%
-------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 7 1.25%(f) (0.85%)(f) 13.48%(f) (13.08%)(f) 9.79%
Year Ended October 31, 2005 $ 1,183 1.25% (0.09%) 3.00% (1.84%) 47.04%
Year Ended October 31, 2006 $ 3,016 1.25% 0.42% 1.59% 0.09% 32.64%
-------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 80 1.25%(f) (0.85%)(f) 13.48%(f) (13.08%)(f) 9.79%
Year Ended October 31, 2005 $ 3,604 1.25% 0.20% 3.20% (1.76%) 47.04%
Year Ended October 31, 2006 $ 14,907 1.25% 0.41% 1.59% 0.09% 32.64%
-------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 0.85%(f) (0.45%)(f) 13.07%(f) (12.67%)(f) 9.79%
Year Ended October 31, 2005 $ 1 0.80% 2.16% 4.28% (1.32%) 47.04%
Year Ended October 31, 2006 $ 1 0.72% 0.85% 0.87% 0.70% 32.64%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 1 0.40%(f) 0.00%(f) 12.62%(f) (12.22%)(f) 9.79%
Year Ended October 31, 2005 $ 1 0.34% 2.69% 4.45% (1.42%) 47.04%
Year Ended October 31, 2006 $ 1 0.36% 1.19% 0.91% 0.64% 32.64%
-------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 1,021 0.25%(f) 0.15%(f) 12.47%(f) (12.07%)(f) 9.79%
Year Ended October 31, 2005 $ 1,154 0.25% 2.73% 3.33% (0.36%) 47.04%
Year Ended October 31, 2006 (g) $ 1 0.25% 1.05% 0.71% 0.59% 32.64%
-------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(e) Not annualized.
(f) Annualized.
(g) Net investment income (loss) is based on average shares outstanding during the period.
34 | GARTMORE OPTIMAL ALLOCATIONS SERIES
SECTION 6 GARTMORE OPTIMAL ALLOCATIONS FUND: GROWTH FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 0.09 0.09
Year Ended October 31, 2005 $ 10.09 0.17 1.31 1.48
Year Ended October 31, 2006 $ 11.33 0.27 1.67 1.94
--------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.03) 0.07 0.04
Year Ended October 31, 2005 $ 10.04 0.12 1.27 1.39
Year Ended October 31, 2006 $ 11.23 0.29 1.55 1.84
--------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.03) 0.07 0.04
Year Ended October 31, 2005 $ 10.04 0.13 1.26 1.39
Year Ended October 31, 2006 $ 11.22 0.37 1.46 1.83
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.01) 0.07 0.06
Year Ended October 31, 2005 $ 10.06 0.19 1.27 1.46
Year Ended October 31, 2006 $ 11.31 0.03 1.86 1.89
--------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 0.07 0.07
Year Ended October 31, 2005 $ 10.07 0.24 1.28 1.52
Year Ended October 31, 2006 $ 11.34 0.07 1.88 1.95
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 0.08 0.08
Year Ended October 31, 2005 $ 10.08 0.25 1.27 1.52
Year Ended October 31, 2006 (g) $ 11.35 0.04 1.93 1.97
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) - - - $ 10.09 0.90%(e)
Year Ended October 31, 2005 (0.24) - (0.24) $ 11.33 14.87%
Year Ended October 31, 2006 (0.60) (0.16) (0.76) $ 12.51 17.79%
--------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) - - - $ 10.04 0.40%(e)
Year Ended October 31, 2005 (0.20) - (0.20) $ 11.23 14.07%
Year Ended October 31, 2006 (0.59) (0.16) (0.75) $ 12.32 16.94%
--------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) - - - $ 10.04 0.40%(e)
Year Ended October 31, 2005 (0.21) - (0.21) $ 11.22 14.07%
Year Ended October 31, 2006 (0.58) (0.16) (0.74) $ 12.31 16.91%
--------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - - - $ 10.06 0.50%(e)
Year Ended October 31, 2005 (0.21) - (0.21) $ 11.31 14.70%
Year Ended October 31, 2006 (0.60) (0.16) (0.76) $ 12.44 17.43%
--------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.07 0.80%(e)
Year Ended October 31, 2005 (0.25) - (0.25) $ 11.34 15.10%
Year Ended October 31, 2006 (0.61) (0.16) (0.77) $ 12.52 17.91%
--------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.08 0.80%(e)
Year Ended October 31, 2005 (0.25) - (0.25) $ 11.35 15.25%
Year Ended October 31, 2006 (g) (0.61) (0.16) (0.77) $ 12.55 18.11%
--------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES TO (LOSS) TO MENTS) TO MENTS) TO
PERIOD AVERAGE NET AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 4 0.56%(f) (0.27%)(f) 13.04%(f) (12.75%)(f) 7.82%
Year Ended October 31, 2005 $ 998 0.53% 0.41% 3.91% (2.97%) 31.16%
Year Ended October 31, 2006 $ 3,999 0.51% 0.17% 1.32% (0.64%) 47.77%
----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 1 1.25%(f) (0.85%)(f) 13.48%(f) (13.08%)(f) 7.82%
Year Ended October 31, 2005 $ 189 1.25% 0.68% 5.11% (3.18%) 31.16%
Year Ended October 31, 2006 $ 715 1.25% (0.50%) 2.06% (1.31%) 47.77%
----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 1 1.25%(f) (0.85%)(f) 13.48%(f) (13.08%)(f) 7.82%
Year Ended October 31, 2005 $ 1,517 1.25% (0.71%) 4.35% (3.82%) 31.16%
Year Ended October 31, 2006 $ 6,652 1.25% (0.51%) 2.05% (1.31%) 47.77%
----------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 0.85%(f) (0.45%)(f) 13.07%(f) (12.67%)(f) 7.82%
Year Ended October 31, 2005 $ 1 0.80% 1.80% 5.55% (2.94%) 31.16%
Year Ended October 31, 2006 $ 1 0.74% (0.06%) 1.47% (0.79%) 47.77%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 1 0.40%(f) 0.00%(f) 12.62%(f) (12.22%)(f) 7.82%
Year Ended October 31, 2005 $ 1 0.30% 2.30% 5.78% (3.15%) 31.16%
Year Ended October 31, 2006 $ 1 0.35% 0.28% 1.51% (0.88%) 47.77%
----------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 1,008 0.25%(f) 0.15%(f) 12.47%(f) (12.07%)(f) 7.82%
Year Ended October 31, 2005 $ 1,160 0.25% 2.35% 4.36% (1.76%) 31.16%
Year Ended October 31, 2006 (g) $ 1 0.25% 0.33% 1.34% (0.75%) 47.77%
----------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(e) Not annualized.
(f) Annualized.
(g) Net investment income (loss) is based on average shares outstanding during the period.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 35
SECTION 6 GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
--------------------------------------------------------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 0.34 0.34
Year Ended October 31, 2005 $ 10.34 0.27 1.21 1.48
Year Ended October 31, 2006 $ 11.53 0.37 1.92 2.29
--------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.02) 0.32 0.30
Year Ended October 31, 2005 $ 10.30 0.17 1.24 1.41
Year Ended October 31, 2006 $ 11.46 0.28 1.90 2.18
--------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 10.00 - 0.30 0.30
Year Ended October 31, 2005 $ 10.30 0.17 1.24 1.41
Year Ended October 31, 2006 $ 11.45 0.27 1.91 2.18
--------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 10.00 (0.01) 0.33 0.32
Year Ended October 31, 2005 $ 10.32 (0.34) 1.81 1.47
Year Ended October 31, 2006 $ 11.54 0.48 1.78 2.26
--------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 0.33 0.34
Year Ended October 31, 2005 $ 10.34 0.33 1.19 1.52
Year Ended October 31, 2006 $ 11.56 0.08 2.22 2.30
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 10.00 0.01 0.33 0.34
Year Ended October 31, 2005 $ 10.34 0.34 1.19 1.53
Year Ended October 31, 2006 (h) $ 11.56 0.04 2.30 2.34
--------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
---------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) - - - $ 10.34 3.40%(e)
Year Ended October 31, 2005 (0.29) -(g) (0.29) $ 11.53 14.59%
Year Ended October 31, 2006 (0.48) (0.13) (0.61) $ 13.21 20.48%
---------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) - - - $ 10.30 3.00%(e)
Year Ended October 31, 2005 (0.25) -(g) (0.25) $ 11.46 13.89%
Year Ended October 31, 2006 (0.45) (0.13) (0.58) $ 13.06 19.67%
---------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) - - - $ 10.30 3.00%(e)
Year Ended October 31, 2005 (0.26) -(g) (0.26) $ 11.45 13.90%
Year Ended October 31, 2006 (0.45) (0.13) (0.58) $ 13.05 19.59%
---------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - - - $ 10.32 3.20%(e)
Year Ended October 31, 2005 (0.25) -(g) (0.25) $ 11.54 14.36%
Year Ended October 31, 2006 (0.48) (0.13) (0.61) $ 13.19 20.23%
---------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.34 3.40%(e)
Year Ended October 31, 2005 (0.30) -(g) (0.30) $ 11.56 14.92%
Year Ended October 31, 2006 (0.49) (0.13) (0.62) $ 13.24 20.63%
---------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) - - - $ 10.34 3.40%(e)
Year Ended October 31, 2005 (0.31) -(g) (0.31) $ 11.56 15.07%
Year Ended October 31, 2006 (h) (0.50) (0.13) (0.63) $ 13.27 20.84%
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME (LOSS)
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 80 0.56%(f) 0.75%(f) 12.49%(f) (11.17%)(f) 7.19%
Year Ended October 31, 2005 $ 5,133 0.53% 2.31% 1.54% 1.30% 28.77%
Year Ended October 31, 2006 $ 24,363 0.51% 0.43% 0.74% 0.21% 13.76%
---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 1 1.25%(f) (0.58%)(f) 12.98%(f) (12.30%)(f) 7.19%
Year Ended October 31, 2005 $ 982 1.25% 0.27% 2.22% (0.70%) 28.77%
Year Ended October 31, 2006 $ 3,714 1.25% (0.23%) 1.48% (0.46%) 13.76%
---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 36 1.25%(f) (1.04%)(f) 12.92%(f) (12.72%)(f) 7.19%
Year Ended October 31, 2005 $ 9,200 1.25% 0.25% 2.22% (0.72%) 28.77%
Year Ended October 31, 2006 $ 35,182 1.25% (0.24%) 1.48% (0.47%) 13.76%
---------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 0.85%(f) (0.18%)(f) 12.57%(f) (11.90%)(f) 7.19%
Year Ended October 31, 2005 $ 1 0.84% (0.55%) 1.90% (1.62%) 28.77%
Year Ended October 31, 2006 $ 78 0.85% 0.15% 1.07% (0.07%) 13.76%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 1 0.40%(f) 0.27%(f) 12.12%(f) (11.44%)(f) 7.19%
Year Ended October 31, 2005 $ 1 0.33% 2.98% 1.94% 1.38% 28.77%
Year Ended October 31, 2006 $ 1 0.34% 0.50% 0.70% 0.14% 13.76%
---------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $ 1,034 0.25%(f) 0.42%(f) 11.97%(f) (11.29%)(f) 7.19%
Year Ended October 31, 2005 $ 1,189 0.25% 3.04% 1.41% 1.87% 28.77%
Year Ended October 31, 2006 (h) $ 1 0.25% 0.29% 0.56% (0.01%) 13.76%
---------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charge.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from June 29, 2004 (commencement of operations) through October 31, 2004.
(e) Not annualized.
(f) Annualized.
(g) The amount is less than $0.005.
(h) Net investment income (loss) is based on average shares outstanding during the period.
36 | GARTMORE OPTIMAL ALLOCATIONS SERIES
APPENDIX DESCRIPTION OF UNDERLYING INVESTMENTS
Following is a description of the Underlying Funds that are currently eligible for each asset class. The mix of Underlying Funds held by an individual Optimal Fund depends on its target allocation and the portfolio manager's assessment of current economic and market conditions. The following list of eligible Underlying Funds is subject to change at any time and without notice. Prospectuses for the Underlying Funds should be referred to for more information.
U.S. STOCKS - LARGE CAP STOCKS
GARTMORE GROWTH FUND seeks long-term capital appreciation and invests primarily in common stocks of large-cap companies. When selecting securities, the Fund's portfolio managers consider, among other things, a company's financial strength, competitive position in its industry, projected future earnings, cash flow and dividends. The portfolio managers look for companies whose earnings are expected to consistently grow faster than other companies in the market.
GARTMORE LARGE CAP VALUE FUND seeks to maximize total return, consisting of both capital appreciation and current income. Under normal circumstances, the Fund typically invests at least 80% of the value of its net assets in equity securities issued by large-cap companies, utilizing a value style of investing. In pursuing the Fund's objective, the portfolio managers compare securities of larger companies to others similarly situated, using some or all of the following factors, which the portfolio managers believe have predictive performance characteristics: earnings momentum; price momentum; and price-to-economic value. The portfolio managers further seek to minimize risk by investing in companies that possess characteristics similar to the companies in the Fund's benchmark, the Russell 1000(R) Value Index, which measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
GARTMORE NATIONWIDE FUND seeks total return through a flexible combination of capital appreciation and current income. The Fund invests primarily in common stocks. When selecting securities, the Fund's portfolio managers consider companies that demonstrate above-average revenue and earnings growth, consistent earnings growth and attractive value.
GARTMORE NATIONWIDE LEADERS FUND seeks a high total return from a concentrated portfolio of U.S. securities, primarily common stocks and convertible securities of large companies. Under normal circumstances, the Fund typically invests at least 80% of the value of its net assets in stocks of "U.S. Leaders." The Fund's portfolio manager defines a U.S. Leader as a company with a strong franchise, capable of taking advantage of its positioning in the marketplace. Because these companies have a reputation for quality management and superior products and services, Fund management expects these companies to become dominant in their industries. The portfolio manager seeks companies that generally demonstrate above average revenue growth, above average earnings growth, consistent earnings growth and attractive value. The Fund typically holds a core group of 25 to 35 common stocks of large-cap and mid-cap companies.
GARTMORE U.S. GROWTH LEADERS FUND seeks long-term growth and under normal circumstances invests at least 80% of the value of its net assets in stocks of "U.S. Growth Leaders." The Fund's portfolio managers define a "U.S. Growth Leader" as a U.S. company with a strong and improving franchise that is well positioned to take advantage of growth opportunities. Because these companies have high growth potential and a reputation for quality management and superior products and services, the managers expect them to become dominant in their industries. The managers look for companies whose earnings are expected to grow faster than other companies in the market. The Fund typically holds a core group of 25 to 35 stocks of companies of any size whose earnings are expected to grow faster than those of other companies in the market. The Fund may hold a limited number of additional common stocks at times when the portfolio manager is accumulating new positions, selling positions or responding to exceptional market conditions. The Fund invests 25% or more of its total assets in software and technology-related companies.
U.S. STOCKS - SMALL/MID-CAP STOCKS
GARTMORE MID CAP GROWTH FUND seeks long-term capital appreciation and, under normal circumstances, invests at least 80% of the value of its net assets in stocks of mid-cap companies. The Fund focuses on reasonably priced growth companies. In selecting stocks, the Fund's portfolio managers review the earnings growth of all publicly-traded mid-cap companies over the past three years and selects investments based on characteristics including above-average, consistent earnings growth and superior forecasted growth versus the market; financial strength and stability; balance sheet strength; strong competitive advantage within the securities industry; positive investor sentiment; relative market value and management team strength.
GARTMORE MID CAP GROWTH LEADERS FUND seeks long-term capital appreciation, and under normal circumstances invests at least 80% of the value of its net assets in equity securities issued by mid-cap companies that the Fund's management believes are, or have the potential to be, Mid Cap Growth Leaders. Fund management tries to choose such investments that will increase in value over the long term. Under normal circumstances, the Fund holds between 25 and 40 such securities. From time-to-time, the Fund may invest a portion of its portfolio in companies experiencing "special situations", such as acquisitions, consolidations, mergers, reorganizations or other unusual developments, if the portfolio manager believes equity securities issued by those companies will increase in value.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 37
APPENDIX DESCRIPTION OF UNDERLYING INVESTMENTS (CONT.)
GARTMORE SMALL CAP FUND seeks long-term capital appreciation and, under normal circumstances, invests at least 80% of the value of its net assets in stocks of small-cap companies. The Fund's portfolio management considers many factors when selecting securities, including measures of earnings momentum, relative value, management's decisions and price trends. The Fund may also invest in stocks of larger U.S. companies and in foreign securities. The Fund may also invest without limit in initial public offerings ("IPOs") of small-cap companies, although such IPOs may not be available for investment by the Fund or the impact of such IPOs would be uncertain.
GARTMORE SMALL CAP LEADERS FUND seeks long-term capital appreciation and, under normal circumstances, invests 80% of the value of its net assets in equity securities of issuers considered to be small-cap companies as of the time of investment. The Fund is managed using a multi-team approach. One team employs a small-cap growth style while the other uses a small-cap value style. The Gartmore Small Cap Growth Team invests in securities of undiscovered, emerging growth small-cap companies in an attempt to provide investors with potentially higher returns than funds that invest primarily in larger, more established companies. The Gartmore Small Cap Value Team looks at factors such as earnings momentum and relative value, management action and price trends when selecting securities. The Fund may invest without limit in IPOs of small-cap companies, although such IPOs may not be available for investment by the Fund or the impact of such IPOs would be uncertain.
GARTMORE VALUE OPPORTUNITIES FUND seeks long-term capital appreciation through investment in common stocks or their equivalents. Under normal circumstances, the Fund invests primarily in equity securities issued by small-cap companies that the Fund's portfolio manager considers to be "value" companies. The portfolio managers believe these companies have strong earnings growth potential, which has not been fully valued by the market. The Fund also invests in companies that are not well recognized, in "special situations" (companies involved in acquisitions, consolidations, mergers or other unusual developments) and turnaround situations (companies that have experienced significant business problems but, in the portfolio manager's view, have favorable prospects for recovery). The Fund may also invest a portion of its portfolio in mid-cap companies and in real estate investment trusts (REITs) based in either the U.S. or in other countries.
INTERNATIONAL STOCKS
GARTMORE INTERNATIONAL GROWTH FUND seeks long-term capital growth by investing primarily in equity securities of companies in Europe, Australasia, the Far East and other regions, including developing countries. Under normal circumstances the Fund invests at least 80% of its asset in securities issued by companies that are located in, or derive a significant portion of their earnings from, a number of countries outside the U.S. The Fund's portfolio managers select companies the managers believe have earnings growth potential that the market has underestimated. The Fund's equity investments may include common stocks, equity interests in foreign investment funds or trusts and depositary receipts. The Fund may use derivatives, primarily futures and options, for efficient portfolio management.
GARTMORE WORLDWIDE LEADERS FUND seeks long-term capital growth and, under normal circumstances, invests at least 80% of the value of its net assets in equity securities of companies located throughout the world, including the U.S. Some of these are multinational companies, while others are located and have primary economic ties in one country. Ordinarily, the Fund invests in companies from at least three different countries. The Fund's portfolio managers choose companies they consider to be "Worldwide Leaders", defined as a company located anywhere in the world that appears well positioned to take advantage of growth opportunities in the company's industry. The portfolio managers select companies that they believe offer long-term, strategic growth opportunities and companies believed to offer short-term tactical opportunities based on current circumstances. The Fund is non-diversified, which means it may invest a significant portion of it's assets in securities of a single or small number of companies. The Fund typically invests in securities issued by approximately 30-40 companies. The Fund may also invest in derivatives, such as futures and options for efficient portfolio management.
BONDS
GARTMORE BOND FUND seeks as high a level of current income as is consistent with preserving capital. The Fund normally invests 80% of the value of its assets primarily in fixed-income securities that are investment-grade, including corporate bonds, U.S. government securities, U.S. government agency securities. The Fund also invests in foreign government and corporate bonds denominated in U.S. dollars and in mortgage-backed and asset-backed securities. The Fund may also invest in commercial paper rated in one of the two highest rating categories by a rating agency. Although the Fund focuses on "investment-grade" taxable debt securities, the Fund may invest a portion of the portfolio in debt securities rated below investment grade, also known as "junk bonds." In selecting securities, the Fund's portfolio managers look for value and typically maintain an average portfolio duration of three to seven years.
GARTMORE GOVERNMENT BOND FUND seeks as high a level of current income as is consistent with preserving capital. Under normal circumstances, the Fund invests at least 80% of its net assets in U.S. government securities and U.S. government agency securities. To select investments that fit the Fund's objectives, the portfolio manager relies primarily on interest rate expectations, yield-curve analysis (determining whether a short-, intermediate-, or long-term duration is appropriate based on interest rates), economic forecasting and market sector analysis. The portfolio manager generally maintains an average dollar-weighted maturity of five to nine years and an average portfolio duration of four to six years.
38 | GARTMORE OPTIMAL ALLOCATIONS SERIES
APPENDIX DESCRIPTION OF UNDERLYING INVESTMENTS (CONT.)
UNAFFILIATED BOND FUNDS The Fund may invest in one or more unaffiliated mutual funds or exchange-traded funds that, under normal circumstances, invest at least 80% of their net assets in fixed-income securities that are investment-grade, including but not limited to U.S. corporate bonds, U.S. government securities, U.S. government agency securities, U.S. dollar-denominated foreign corporate bonds or U.S. dollar-denominated foreign government bonds. These funds also may purchase mortgage-backed securities and asset-backed securities, and may invest in fixed-income securities that pay interest on either a fixed-rate or variable-rate basis. Each of these funds also may enter into certain derivatives contracts, such as futures or options, solely for the purpose of adjusting the fund's portfolio duration in order to minimize fluctuation of the fund's share value.
SHORT-TERM INVESTMENTS
GARTMORE ENHANCED INCOME FUND seeks to provide a high level of current income while preserving capital and minimizing fluctuations in share value. Under normal market conditions, the Fund invests primarily in high-grade corporate bonds, U.S. government securities and U.S. government agency securities. The Fund may also purchase mortgage-backed and asset-backed securities, and may invest in fixed income securities that pay interest on either a fixed-rate or variable-rate basis. The Fund is managed so that its duration will be between 6 months and one year and will not exceed two years. The Fund may also enter into derivatives contracts, including futures or options, solely for the purpose of adjusting the fund's duration in order to minimize fluctuation of the Fund's share value.
GARTMORE SHORT DURATION BOND FUND seeks to provide a high level of current income while preserving capital and minimizing fluctuations in share value. Under normal circumstances, the Fund invests primarily in U.S. government securities, U.S. government agency securities and corporate bonds that are investment grade. The Fund also may purchase mortgage-backed securities and asset-backed securities, and may invest in fixed income securities that pay interest on either a fixed-rate or variable-rate basis. The Fund is managed so that its duration generally will not exceed three years, and the Fund may enter into certain derivatives contracts, such as futures or options, solely for the purpose of adjusting the Fund's duration in order to minimize fluctuation of the Fund's share value.
AFFILIATED OR UNAFFILIATED MONEY MARKET FUNDS The Fund may invest in one or more affiliated or unaffiliated mutual funds that, under normal circumstances, seek as high a level of current income as is consistent with preserving capital and maintaining liquidity. These funds will invest in high-quality money market obligations maturing in 397 days or less. All money market obligations must be denominated in U.S. dollars and be rated in one of the two highest short-term ratings categories by a nationally recognized statistical rating organization or, if unrated, be of comparable quality. These funds may invest in floating- and variable-rate obligations and may enter into repurchase agreements. These funds will maintain a dollar-weighted average maturity of 90 days or less.
SPECIALTY ASSETS
GARTMORE EMERGING MARKETS FUND seeks long-term capital growth by investing primarily in equity securities of companies located in "emerging market countries." Under normal circumstances, the Fund invests at least 80% of its assets in equity securities of companies that are located in emerging markets or developing countries or that derive a significant portion of their earnings or revenues from emerging market countries. The Fund's portfolio managers select companies they believe have the potential to deliver unexpected earnings growth. The Fund's securities holdings may include common stocks, preferred stocks, equity interests in foreign investment funds or trusts, derivative securities and depositary receipts.
GARTMORE GLOBAL FINANCIAL SERVICES FUND seeks long-term capital growth and under normal circumstances, invests at least 80% of the value of its net assets in equity securities of U.S. and foreign companies of any size that have business operations in or related to financial services. The Fund's managers consider companies with at least 50% of their assets, revenues or net income related to the financial services sector. The Fund is non-diversified and concentrates 25% or more of its assets in at least one of the following industry groups: banks and savings and loan institutions and their holding companies, consumer and industrial finance companies, investment banks, insurance brokers, securities brokers and investment advisers, real estate-related companies, leasing companies and insurance companies. The Fund's holdings of equity securities may include common stocks, equity interests in investment funds or trusts, convertible securities, warrants, real estate investment trusts (REITs) and depositary receipts.
GARTMORE GLOBAL HEALTH SCIENCES FUND seeks long-term capital appreciation and, under normal circumstances, invests at least 80% of the value of its net assets in equity securities issued by U.S. and foreign companies (including those located in emerging markets countries) of any size with business operations in or related to health sciences. The Fund's portfolio managers consider companies that derive at least 50% of their assets, revenues or net income from health sciences. The Fund is non-diversified and concentrates 25% or more of its assets in at least one of the following industry groups: health care, pharmaceuticals, biotechnology, medical supplies, medical services and medical devices. The Fund's holdings of equity securities may include common stocks, convertible securities and depositary receipts.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 39
APPENDIX DESCRIPTION OF UNDERLYING INVESTMENTS (CONT.)
GARTMORE GLOBAL NATURAL RESOURCES FUND seeks long-term capital growth and, under normal circumstances, invests at least 80% of its the value of its net assets in equity securities issued by U.S. and foreign companies (including those located in emerging markets countries) of any size with business operations in or related to activities in natural resources industries. The Fund's portfolio managers generally consider companies that derive at least 50% of their assets, revenues or net income from activities in natural resources industries. The Fund is non-diversified and concentrates more than 25% of its assets in natural resources industries, including integrated oil, oil and gas exploration and production, gold and other precious metals, steel and iron ore production, energy services and technology, ferrous and nonferrous metals, base metal production, forest products, agricultural products, paper products, chemicals, building materials, coal, alternative energy sources, real estate and environmental services. The Fund's holdings of equity securities may include common stocks, preferred stocks, equity interests in investment funds or trusts, convertible securities, warrants, real estate investment trusts (REITs) and depositary receipts. The Fund may invest in commodity-linked derivatives such as commodity options and futures, in an attempt to increase its investment return and manage the Fund's exposure to changing commodity prices, securities prices and other economic variables.
GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND seeks long-term capital appreciation and, under normal circumstances, invests at least 80% of the value of its net assets in stocks of U.S. and foreign companies (including those located in emerging markets countries) of any size, with business operations in or related to technology or communications. The Fund's managers consider companies that derive at least 50% of their assets, revenues or net income related to technology and communications industries. The Fund is non-diversified and concentrates more than 25% of its total assets in technology and/or communications industries, including hardware and equipment, information technology, software, consulting and services, consumer electronics, defense technology, broadcasting and communication equipment.
GARTMORE GLOBAL UTILITIES FUND seeks long-term capital growth and, under normal circumstances, invests at least 80% of the value of its net assets in equity securities issued by U.S. and foreign companies (including those located in emerging markets countries) of any size, with business operations in or related to utilities. The Fund's manager generally considers companies that derive at least 50% of their assets, revenues or net income from utilities servicing or activities in utilities-related industries. The Fund is non-diversified and concentrates 25% or more of its assets in at least one of the following industry groups: energy sources, maintenance services, companies that provide infrastructure for utilities, cable television, radio, telecommunications services, transportation services and water and sanitary services. Although utility companies have traditionally paid above-average dividends, the portfolio manager focuses on companies with strong growth potential rather than those paying high current dividends.
GARTMORE MICRO CAP EQUITY FUND* seeks long-term capital appreciation and, under normal circumstances invests at least 80% of the value of its net assets in stocks of "micro-cap companies." The Fund generally holds between 50 and 100 securities. The Fund focuses on undiscovered, small-sized emerging growth companies. Since micro-capitalization companies are generally less well known and typically not analyzed as extensively as larger companies, their stocks may be mispriced, creating an opportunity for higher returns. In analyzing specific companies, the Fund's portfolio manager ordinarily looks for several of the following characteristics: development of new products, technologies or markets; a high quality balance sheet; above average earnings growth; attractive valuation; and a strong management team. Although the Fund's portfolio manager looks for companies with the potential for strong earnings growth, some of the Fund's holdings may be companies that are experiencing losses. The Fund may invest without limit in IPOs, although it is uncertain whether such IPOs will be available for investment by the Fund and what impact, if any, they will have on the Fund's performance.
* The Gartmore Micro Cap Equity Fund ("Micro Cap Fund") closed to new investors effective November 30, 2004. As of the date of this prospectus, the Micro Cap Fund remains open to investors through the Optimal Funds.
GARTMORE MARKET NEUTRAL FUND seeks to provide long-term capital appreciation from a broadly diversified portfolio of U.S. stocks while neutralizing the general risks associated with stock market investing. The Fund seeks to achieve its objective regardless of the direction of the market through the purchase and short sale of equity securities of U.S. companies. The Fund takes long positions in common stocks of companies that the Fund's management believes will outperform the market. Simultaneously, the Fund intends to engage in short sales of stocks that the portfolio manager believes will underperform the market and decline in value. The Fund uses a multi-cap and multi-style approach, meaning that it may invest across different industries, sectors and market capitalization levels, targeting both growth style and value style types of companies. The Fund attempts to maintain approximately equal dollar value exposure in its long and short positions (to the extent the market permits) in order to neutralize the effects on its performance resulting from general U.S. stock market movements or sector swings. The Fund seeks to capitalize on opportunities presented by changing market environments. The Adviser uses quantitative techniques incorporated into a multi-factor model that seeks to select the highest returning securities in the current market environment. This model attempts to capitalize on the fact that the financial markets are dynamic and investment opportunities vary over time.
40 | GARTMORE OPTIMAL ALLOCATIONS SERIES
APPENDIX DESCRIPTION OF UNDERLYING INVESTMENTS (CONT.)
GARTMORE U.S. GROWTH LEADERS LONG-SHORT FUND seeks long-term capital appreciation. The Fund primarily invests and executes short sales in equity securities of U.S. and non-U.S. issuers. Under normal circumstances, the Fund invests 80% of the value of its net assets in companies that are organized under the laws of the U.S., have their principal places of business in the U.S. or whose stock is traded primarily in the U.S. The Fund may invest in companies of any size, including small or medium-sized companies. In general, the Fund invests, or takes "long positions" in companies the portfolio managers believe will appreciate in value. Simultaneously, the Fund takes "short positions", or agrees to sell at a specified price, companies the portfolio manager expects to decline in value. The Fund typically takes long positions in "leaders," companies benefiting from superior management, products, or distribution that the portfolio manager believes will generate earnings growth exceeding market expectations. The Fund's portfolio manager intends to take short positions in stocks whose earnings seem to be reflected in the current price or appear likely to fall short of expectations, those that operate in an industry with a structural weakness, are believed to have poor quality management, or appear likely to suffer an event affecting their long-term earnings power. In addition, the Fund may make strategic paired trades, taking both long and short positions in companies in the same industry in order to minimize the effect of market and sector fluctuations on the Fund's performance. The Fund may also invest in exchange-traded funds and derivatives.
UNAFFILIATED TIPS BOND FUNDS. The Fund may invest in one or more unaffiliated mutual funds or exchange-traded funds that, under normal circumstances, invest at least 80% of their net assets in Treasury Inflation Protected Securities, also known as TIPS. TIPS are securities issued by the U.S. Treasury that are designed to provide inflation protection to investors. TIPS are income-generating instruments whose interest and principal payments are adjusted for inflation. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index. A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase. Because of this inflation adjustment feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds. While TIPS may provide investors with a hedge against inflation, in the event of deflation, in which prices decline over time, the principal and income of inflation-protected bonds would likely decline in price.
UNAFFILIATED INTERNATIONAL BOND FUNDS. The Fund may invest in one or more unaffiliated mutual funds that, under normal circumstances, invest at least 80% of their net assets in fixed-income securities of foreign government and corporate issuers. Such fixed-income securities may include long-term and short-term foreign government bonds, participation interests in loans, debt obligations of foreign corporations, structured note derivatives, stripped securities, zero coupon securities and bonds issued by "supra-national" entities, such as the World Bank. These funds also may invest in securities that are rated below investment grade (commonly known as "junk bonds") and in securities issued in emerging market countries. In addition to the types of risk offered by funds that invest primarily in U.S. bonds, these funds also present the risks inherent in foreign securities and lower- or non-rated securities. These risks are more significant with respect to fixed-income securities issued or traded in emerging markets and developing countries.
UNAFFILIATED U.S. AND INTERNATIONAL REAL ESTATE FUNDS The Funds may invest in one or more unaffiliated mutual funds or exchange-traded funds that, under normal circumstances, invest at least 80% of their net assets in equity securities issued by real estate investment trusts and companies engaged in the real estate industry. These Funds typically seek long-term capital appreciation, with income as a secondary objective. A company is considered to be a "real estate company" if at least 50% of the company's revenues or 50% of the market value of the company's assets are related to the ownership, construction, management or sale of real estate.
UNAFFILIATED COMMODITY-LINKED FUNDS The Fund may invest in one or more unaffiliated mutual funds or exchange-traded funds that, under normal circumstances, invest at least 80% of their net assets, plus any borrowings for investment purposes, in a combination of commodity-linked derivative instruments and fixed-income securities backing those instruments. These funds will invest primarily in commodity-linked structured notes and swaps designed to track the performance of one of the widely-recognized commodity indexes.
GARTMORE OPTIMAL ALLOCATIONS SERIES | 41
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest and keep it with your records. The following documents -- which may be obtained free of charge--contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920 or write to us at the address listed below, to request (1) additional copies free of charge or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m.
- 9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for
closing share prices. Also, visit the Gartmore Funds' website at
www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC:
o on the SEC's EDGAR database via the Internet at www.sec.gov,
o by electronic request to publicinfo@sec.gov.
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102. (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C)2007 NWD Investment Management, Inc. All rights reserved.
PR-OPT 2/07
NorthPointe Small Cap Growth Fund
NorthPointe Small Cap Value Fund
[LOGO] Gartmore Funds
FundPROSPECTUS
February 28, 2007
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these Funds' shares or determined whether this prospectus is complete or accurate. To state otherwise is a crime.
WWW.NWDFUNDS.COM
FUND AND CLASS TICKER -------------------------------------------------------------------------------- NorthPointe Small Cap Growth Fund Class A GNSAX -------------------------------------------------------------------------------- NorthPointe Small Cap Growth Fund Class B GNSBX -------------------------------------------------------------------------------- NorthPointe Small Cap Growth Fund Class C GNSCX -------------------------------------------------------------------------------- NorthPointe Small Cap Growth Fund Class R GNPRX -------------------------------------------------------------------------------- NorthPointe Small Cap Growth Fund Institutional Service Class GNSSX -------------------------------------------------------------------------------- NorthPointe Small Cap Growth Fund Institutional Class GNSIX -------------------------------------------------------------------------------- NorthPointe Small Cap Value Fund Institutional Class NNSVX -------------------------------------------------------------------------------- |
TABLE OF CONTENTS
3 KEY TERMS
4 SECTION 1: FUND SUMMARIES AND PERFORMANCE
NorthPointe Small Cap Growth Fund
NorthPointe Small Cap Value Fund
11 SECTION 2: FUND DETAILS
Additional Information about Investments,
Investment Techniques and Risks
13 SECTION 3: FUND MANAGEMENT
Investment Adviser
Subadviser
Portfolio Management
Multi-Manager Structure
15 SECTION 4: INVESTING WITH GARTMORE FUNDS
Choosing a Share Class
Sales Charges and Fees
Revenue Sharing
Contacting Gartmore Funds
Buying Shares
Fair Value Pricing
Customer Identification Information
Exchanging Shares
Automatic Withdrawal Program
Selling Shares
Excessive or Short-Term Trading
Exchange and Redemption Fees
26 SECTION 5: DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and
Other Tax-Deferred Accounts
Backup Withholding
28 SECTION 6: FINANCIAL HIGHLIGHTS
|
GARTMORE NORTHPOINTE FUNDS | 1
NORTHPOINTE Funds
INTRODUCTION TO THE NORTHPOINTE FUNDS
THIS PROSPECTUS PROVIDES INFORMATION ABOUT TWO FUNDS (THE "FUNDS"), THE SHARES OF WHICH ARE OFFERED BY GARTMORE MUTUAL FUNDS (THE "TRUST"):
NorthPointe Small Cap Growth Fund
NorthPointe Small Cap Value Fund
THESE FUNDS ARE PRIMARILY INTENDED:
o to help investors seek to grow their capital by pursuing equity investments in small cap companies.
The following section summarizes key information about the funds, including information regarding their investment objectives, principal strategies, principal risks, performance and fees. AS WITH ANY MUTUAL FUND, THERE CAN BE NO GUARANTEE THAT EITHER OF THE FUNDS WILL MEET THEIR RESPECTIVE OBJECTIVES OR THAT THE FUNDS' PERFORMANCE WILL BE POSITIVE FOR ANY PERIOD OF TIME.
Each Fund's investment objective can be changed without shareholder approval.
A NOTE ABOUT SHARE CLASSES
The NorthPointe Small Cap Growth Fund features six different share
classes--Class A, Class B, Class C, Class R, Institutional Service Class and
Institutional Class. However, AS OF THE DATE OF THIS PROSPECTUS, ONLY THE CLASS
R, INSTITUTIONAL SERVICE CLASS AND INSTITUTIONAL CLASS SHARES ARE BEING OFFERED
TO NEW INVESTORS. CURRENT SHAREHOLDERS OF CLASS A, CLASS B OR CLASS C SHARES CAN
CONTINUE TO REINVEST DIVIDENDS AND DISTRIBUTIONS IN SHARES OF SUCH CLASSES. The
NorthPointe Small Cap Value Fund offers Institutional Class shares only. An
investment in any share class of a Fund represents an investment in the same
assets of the Fund. However, the fees, sales charges and expenses for each share
class are different. The different share classes simply let you choose the cost
structure that is right for you. The fees and expenses for each of the Funds are
set forth in the Fund Summaries.
Each Fund may employ a "multi-manager" structure, which means that Gartmore Mutual Fund Capital Trust (the "Adviser"), as each Fund's investment adviser, may hire, replace or terminate one or more subadvisers, not affiliated with the Adviser, for a Fund without shareholder approval. The Adviser believes that this structure gives it increased flexibility to manage the Funds in your best interests and to operate the Funds more efficiently. See Section 3, Fund Management: Multi-Manager Structure for more information.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies and marketing materials related to them will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
2 | GARTMORE NORTHPOINTE FUNDS
KEY TERMS
In an effort to help you better understand the many concepts involved in making an investment decision, we have defined the following terms:
COMMON STOCK - securities representing shares of ownership of a corporation.
EQUITY SECURITIES - securities including common stock, preferred stock, securities convertible into common stock or securities (or other investments) with prices linked to the value of common stocks, foreign investment funds or trusts and depositary receipts that represent an ownership interest in the issuer.
GROWTH STYLE - a style of investing in equity securities of companies that the Fund's management believes have above-average rates of earnings growth and which therefore may experience above-average increases in stock price.
MARKET CAPITALIZATION - a common way of measuring the size of a company based on the price of its common stock times the number of outstanding shares.
SMALL-CAP COMPANIES - companies that have market capitalizations similar to those of companies included in the Russell 2000(R) Index, ranging from $74 million to $3.49 billion as of January 31, 2007.
VALUE STYLE - a style of investing in equity securities that the Fund's management believes are undervalued, which means that their prices are less than Fund management believes they are worth, based on such factors as price-to-book ratio, price-to-earnings ratio and cash flow. Companies issuing such securities may be currently out of favor or experiencing poor operating conditions that Fund management believes to be temporary.
GARTMORE NORTHPOINTE FUNDS | 3
SECTION 1 NORTHPOINTE SMALL CAP GROWTH FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by SMALL-CAP COMPANIES. In pursuing a GROWTH STYLE of investing, the Fund invests primarily in COMMON STOCK of smaller, emerging growth companies in the U.S. that may be undiscovered in an attempt to provide investors with potentially higher returns than a fund that invests primarily in larger, more established companies. The portfolio managers focus on securities that exhibit some or all of the following characteristics:
o development of new products, technologies or markets;
o high quality balance sheet;
o above average earnings growth;
o attractive valuation and
o strong management team.
Although the Fund looks for companies with the potential for strong earnings growth rates, some of the Fund's investments may be in companies that are experiencing losses. There is no limit on the length of operating history for the companies in which the Fund may invest.
The Fund's management considers selling a security when:
o a company's fundamentals change from the time of original investment;
o the valuation measures deteriorate to where other attractive stocks are available more cheaply;
o financial stability weakens;
o management's actions are not in the shareholders' best interests and
o MARKET CAPITALIZATION reaches twice the portfolio buying range.
The Fund may invest without limit in initial public offerings ("IPOs") of small cap companies, although such IPOs may not be available for investment by the Fund or the impact of any such IPO would be uncertain.
The Adviser has chosen NorthPointe Capital LLC as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 2000 Growth Index or other funds with similar investment objectives and strategies.
SMALL CAP RISK - results from investing in stocks of smaller companies. Smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
INITIAL PUBLIC OFFERING RISK - availability of IPOs may be limited and the Fund may not be able to buy any shares at the offering price, or may not be able to buy as many shares at the offering price as it would like. Further, IPO prices often are subject to greater and more unpredictable price changes than more established stocks.
GROWTH STYLE RISK - over time, a growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
4 | GARTMORE NORTHPOINTE FUNDS
SECTION 1 NORTHPOINTE SMALL CAP GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - CLASS A SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2005 2006 -------------------- 5.04% 16.84% |
BEST QUARTER: 16.96% - 1ST QTR OF 2006
WORST QUARTER: -6.22% - 1ST QTR OF 2005
After-tax returns are shown in the table for Institutional Class shares only and will vary for other classes. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE INCEPTION
1 YEAR (SEPT. 29, 2004)
--------------------------------------------------------------------------------
Class A shares - Before Taxes 10.12% 14.53%
--------------------------------------------------------------------------------
Class B shares - Before Taxes 11.00% 15.68%
--------------------------------------------------------------------------------
Class C shares - Before Taxes 15.00% 16.79%
--------------------------------------------------------------------------------
Class R shares - Before Taxes 16.54% 17.28%
--------------------------------------------------------------------------------
Institutional Service Class shares - Before Taxes 17.12% 17.88%
--------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 17.20% 17.96%
--------------------------------------------------------------------------------
Institutional Class shares -
After Taxes on Distributions 15.09% 15.53%
--------------------------------------------------------------------------------
Institutional Class shares -
After Taxes on Distributions
and Sales of Shares 12.35% 14.24%
--------------------------------------------------------------------------------
Russell 2000(R) Growth Index(2) 13.35% 14.59%
--------------------------------------------------------------------------------
|
1 Total returns include the impact of any sales charges and assume redemption of shares at the end of each period.
2 The Russell 2000 Growth Index is an unmanaged index that measures the performance of small-cap stocks of U.S. companies that seem to offer a growth bias. The Index does not pay sales charges, fees or expenses. If sales charges, fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
GARTMORE NORTHPOINTE FUNDS | 5
SECTION 1 NORTHPOINTE SMALL CAP GROWTH FUND SUMMARY AND PERFORMANCE (CONT.)
FEES AND EXPENSES
This table describes the fees and expenses you may pay when buying and holding shares of the Fund depending on the share class you select.
----------------------------------------------------------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INSTITUTIONAL INSTITUTIONAL SERVICE INVESTMENT)(1) CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES CLASS SHARES ----------------------------------------------------------------------------------------------------------------------------------- Maximum Sales Charge (Load) imposed upon purchases (as a percentage of offering price) 5.75%(2) None None None None None ----------------------------------------------------------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) imposed upon redemptions (as a percentage of offering or sale price, whichever is less) None(3) 5.00%(4) 1.00%(5) None None None ----------------------------------------------------------------------------------------------------------------------------------- Redemption/Exchange Fee (as a percentage of amount redeemed orexchanged)(6) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% ----------------------------------------------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ----------------------------------------------------------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.95% 0.95% 0.95% 0.95% 0.95% 0.95% ----------------------------------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) 0.25% 1.00% 1.00% 0.50% None None ----------------------------------------------------------------------------------------------------------------------------------- Other Expenses(7) 0.25% 0.20% 0.20% 0.40% 0.45% 0.20% ----------------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 1.45% 2.15% 2.15% 1.85% 1.40% 1.15% ----------------------------------------------------------------------------------------------------------------------------------- Amount of Fee Waiver/ Expense Reimbursement(8) 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% ----------------------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS/REIMBURSEMENTS) 1.40% 2.10% 2.10% 1.80% 1.35% 1.10% ----------------------------------------------------------------------------------------------------------------------------------- |
1 If you buy and sell shares through a broker or other financial intermediary, the intermediary may also charge you a separate transaction fee.
2 The sales charge on purchases of Class A shares is reduced or eliminated for purchases of $50,000 or more. For more information, see Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
3 A contingent deferred sales charge (CDSC) of up to 0.50% will be imposed on redemptions of Class A shares purchased without a front-end sales charge and for which a finder's fee was paid. Section 4, Investing with Gartmore Funds: Choosing a Share Class--Reduction and Waiver of Class A Sales Charges.
4 A CDSC beginning at 5% and declining to 1% is charged when you sell Class B shares within the first six years of purchase. Class B shares convert to Class A shares after you have held them for seven years. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class B Shares.
5 A CDSC of 1% is charged when you sell Class C shares within the first year after purchase. See Section 4, Investing with Gartmore Funds: Choosing a Share Class--Class C Shares.
6 A redemption/exchange fee of 2% applies to shares redeemed or exchanged
within 90 calendar days after the date they were purchased. This fee is
intended to discourage frequent trading of Fund shares that can negatively
affect the Fund's performance. The fee does not apply to shares purchased
through reinvested dividends or capital gains or shares held in certain
omnibus accounts or retirement plans that cannot implement the fee. See
Section 4, Investing with Gartmore Funds: Selling Shares--Exchange and
Redemption Fees.
7 "Other Expenses" include administrative services fees which are permitted to be up to 0.25% with respect to Class A, Class R and Institutional Service Class shares. For the year ended October 31, 2006, administrative services fees for Class A, Class R and Institutional Service Class Shares were 0.05%, 0.20% and 0.25%, respectively. The full 0.25% in administrative services fees is not reflected in "Other Expenses" at this time for Class A or Class R shares because these classes do not currently sell their shares to intermediaries that charge the full amount permitted.
8 Gartmore Mutual Fund Capital Trust (the "Trust"), the Adviser and NorthPointe Capital LLC, the Fund's subadviser have entered into a written contract limiting operating expenses to 1.10% at least through February 28, 2008 for all share classes of the Fund. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than three years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement. If the maximum amount of administrative services fees were charged, "Total Annual Fund Operating Expenses (After Waivers/Reimbursements)" could increase to 1.60% for Class A and 1.85% for Class R shares of the Fund before the Adviser would be required to further limit the Fund's expenses.
6 | GARTMORE NORTHPOINTE FUNDS
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Class A shares* $ 709 $ 1,003 $ 1,317 $ 2,206
--------------------------------------------------------------------------------
Class B shares 713 968 1,350 2,218
--------------------------------------------------------------------------------
Class C shares 313 668 1,150 2,479
--------------------------------------------------------------------------------
Class R shares 183 577 996 2,165
--------------------------------------------------------------------------------
Institutional Service Class shares 137 438 761 1,675
--------------------------------------------------------------------------------
Institutional Class shares 112 360 628 1,393
--------------------------------------------------------------------------------
|
* Assumes a CDSC does not apply.
You would pay the following expenses on the same investment if you did not sell your shares**:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class B shares $ 213 $ 668 $ 1,150 $ 2,218
--------------------------------------------------------------------------------
Class C shares 213 668 1,150 2,479
--------------------------------------------------------------------------------
|
** Expenses paid on the same investment in Class A (unless your purchase is subject to a CDSC for a purchase of $1,000,000 or more), Class R, Institutional Service Class and Institutional Class shares do not change, whether or not you sell your shares.
The Fund does not apply sales charges on reinvested dividends and other distributions. If these sales charges (loads) were included, your costs would be higher.
GARTMORE NORTHPOINTE FUNDS | 7
SECTION 1 NORTHPOINTE SMALL CAP VALUE FUND SUMMARY AND PERFORMANCE
OBJECTIVE
The Fund seeks long-term capital appreciation.
PRINCIPAL STRATEGIES
Under normal circumstances, the Fund invests at least 80% of the value of its net assets in EQUITY SECURITIES issued by SMALL-CAP COMPANIES.
The Fund invests primarily in stocks of U.S. and foreign companies, which it considers to be VALUE STYLE companies. These companies appear to have good earnings growth potential and the Fund's portfolio managers believe that the market has undervalued them. The Fund will also invest in stocks that are not well recognized and stocks of special situation companies and turnarounds (companies that have experienced significant business problems but which the portfolio managers believe have favorable prospects for recovery). In addition to investing in small-cap companies, the Fund may also invest in larger capitalization companies and in real estate investment trusts ("REITs").
The portfolio managers consider selling a security if:
o there are more attractive securities available;
o the business environment is changing;
o the price fits the portfolio managers' price target or
o to control the overall risk of the portfolio.
The Adviser has chosen NorthPointe Capital LLC as subadviser to manage the Fund's portfolio on a day-to-day basis.
PRINCIPAL RISKS
The Fund cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments--and therefore, the value of Fund shares--may fluctuate. These changes may occur because of:
STOCK MARKET RISK - the Fund could lose value if the individual stocks in which it invests or overall stock markets in which such stocks trade go down.
SELECTION RISK - the portfolio managers may select securities that underperform the stock market, the Russell 2000 Index or other funds with similar investment objectives and strategies.
SMALL CAP RISK - results from investing in stocks of smaller companies. Smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk.
SPECIAL SITUATION COMPANIES RISK - special situation companies are companies that may be involved in acquisitions, consolidations, mergers, reorganizations or other unusual developments that can affect a company's market value. If the anticipated benefits of the development do not materialize, the value of the special situation company may decline.
FOREIGN RISK - the risk that foreign securities may be more volatile, harder to price and less liquid than U.S. securities.
VALUE STYLE RISK - over time, a value investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use different investing styles. Value stocks as a group may be out of favor and underperform the overall equity market for a long period of time, while the market concentrates on "growth" stocks.
REIT RISK - the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
PORTFOLIO TURNOVER - the Fund may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
If the value of the Fund's investments goes down, you may lose money.
8 | GARTMORE NORTHPOINTE FUNDS
SECTION 1 NORTHPOINTE SMALL CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
PERFORMANCE
The bar chart and table below can help you evaluate both the Fund's potential risks and its potential rewards. The bar chart shows how the Fund's annual total returns have varied from year to year. These returns have not been adjusted to show the effect of taxes and do not reflect the impact of sales charges. If taxes and the applicable sales charges were included, the annual total returns would be lower than those shown. The table compares the Fund's average annual total returns to the returns of a broad-based securities index. Both the bar chart and table assume that all dividends and distributions are reinvested in the Fund. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future.
ANNUAL TOTAL RETURNS - INSTITUTIONAL CLASS SHARES
(YEARS ENDED DECEMBER 31)
[BAR CHART]
2001 2002 2003 2004 2005 2006 --------------------------------------------- 8.69% -12.02% 42.49% 16.53% 7.85% 18.03% |
BEST QUARTER: 21.59% - 2ND QTR OF 2003
WORST QUARTER: -17.63% - 3RD QTR OF 2002
After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here. After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
AVERAGE ANNUAL TOTAL RETURNS(1)
AS OF DECEMBER 31, 2006
SINCE
INCEPTION
(JUNE 29,
1 YEAR 5 YEARS 2000)
--------------------------------------------------------------------------------
Institutional Class shares - Before Taxes 18.03% 13.21% 13.84%
--------------------------------------------------------------------------------
Institutional Class shares - After Taxes
on Distributions 14.46% 9.91% 10.85%
--------------------------------------------------------------------------------
Institutional Class shares - After Taxes
on Distributions and Sales of Shares 13.19% 10.16% 10.82%
--------------------------------------------------------------------------------
Russell 2000(R) Index(2) 18.37% 11.39% 8.05%
--------------------------------------------------------------------------------
|
1 These returns reflect performance after expenses are deducted. The Fund does not impose sales charges.
2 The Russell 2000(R) Index is an unmanaged index that measures the performance of smaller U.S. companies. The Index does not pay fees or expenses. If fees and expenses were deducted, the actual returns of the Index would be lower. Individuals cannot invest directly in an index.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay when buying and holding the Institutional Class shares of the Fund.
-------------------------------------------------------------------------------- SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT) None -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- Management Fees (paid to have the Fund's investments professionally managed) 0.85% -------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees (paid from Fund assets to cover the cost of sales, promotions and other distribution activities, as well as certain shareholder servicing costs) None -------------------------------------------------------------------------------- Other Expenses 0.20% -------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES 1.05% -------------------------------------------------------------------------------- Amount of Fee Waivers/Expense Reimbursements 0.05% -------------------------------------------------------------------------------- TOTAL ANNUAL FUND OPERATING EXPENSES AFTER WAIVERS/REIMBURSEMENTS(1) 1.00% -------------------------------------------------------------------------------- |
1 Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust (the "Adviser") have entered into a written contract limiting operating expenses to 1.00% at least through February 28, 2008. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short-sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles and expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. The Trust is authorized to reimburse the Adviser for management fees previously waived and/or for expenses previously paid by the Adviser, provided, however that any reimbursements must be paid at a date not more than five years after the fiscal year in which the Adviser waived the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the expense limitation in the agreement.
GARTMORE NORTHPOINTE FUNDS | 9
SECTION 1 NORTHPOINTE SMALL CAP VALUE FUND SUMMARY AND PERFORMANCE (CONT.)
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 sell all of your shares at the end of those periods. It assumes a 5% return each year, no change in expenses and the expense limitations for one year only (if applicable). 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
--------------------------------------------------------------------------------
Institutional Class shares $ 102 $ 329 $ 575 $ 1,278
--------------------------------------------------------------------------------
|
10 | GARTMORE NORTHPOINTE FUNDS
SECTION 2 FUND DETAILS
ADDITIONAL INFORMATION ABOUT INVESTMENTS,
INVESTMENT TECHNIQUES AND RISKS
STOCK MARKET RISK - Each of the Funds could lose value if the individual stocks in which it has invested and/or the overall stock markets on which the stocks trade decline in price. Stocks and stock markets may experience short-term volatility (price fluctuation) as well as extended periods of price decline or little growth. Individual stocks are affected by many factors, including:
o corporate earnings;
o production;
o management;
o sales and
o market trends, including investor demand for a particular type of stock, such as growth or value stocks, small or large stocks or stocks within a particular industry.
Stock markets are affected by numerous factors, including interest rates, the outlook for corporate profits, the health of the national and world economies, national and world social and political events and the fluctuation of other stock markets around the world.
FOREIGN SECURITIES RISK - Each of the Funds may invest in foreign securities, which may be more volatile, harder to price and less liquid than U.S. securities. Foreign investments involve some of the following risks as well:
o political and economic instability;
o the impact of currency exchange rate fluctuations;
o reduced information about issuers;
o higher transaction costs;
o less stringent regulatory and accounting standards and
o delayed settlement.
Additional risks include the possibility that a foreign jurisdiction might impose or increase withholding taxes on income payable with respect to foreign securities, the possible seizure, nationalization or expropriation of the issuer or foreign deposits (in which a Fund could lose its entire investment in a certain market) and the possible adoption of foreign governmental restrictions such as exchange controls. To the extent a Fund invests in countries with emerging markets, the foreign securities risks are magnified since these countries often have unstable governments, more volatile currencies and less established markets.
SMALL-CAP RISK - in general, stocks of small-cap companies trade in lower volumes and are subject to greater or more unpredictable price changes than larger cap securities or the market overall. Small-cap companies may have limited product lines or markets, be less financially secure than larger companies or depend on a small number of key personnel. If adverse developments occur, such as due to management changes or product failure, the Fund's investment in a small cap company may lose substantial value. Investing in small cap companies requires a longer term investment view and may not be appropriate for all investors.
WARRANTS - securities that give the holder of the warrant the right to buy common stock at a specified price for a specified period of time. Warrants are considered speculative and have no value if they are not exercised before their expiration date.
REIT RISK - the risk associated with direct ownership of real estate and with the real estate industry in general. These risks include possible declines in the value of real estate, possible lack of availability of mortgage funds and unexpected vacancies of properties. REITs that invest in real estate mortgages are subject to prepayment risk.
SECURITIES LENDING - the Funds may lend securities, which involves the risk that the borrower may fail to return the securities in a timely manner or at all. Consequently, a Fund may lose money and there could be a delay in recovering the loaned securities. A Fund could also lose money if it does not recover the loaned securities and/or the value of the collateral falls, including the value of investments made with cash collateral. Under certain circumstances, these events could trigger adverse tax consequences to a Fund.
PORTFOLIO TURNOVER - the Funds may engage in active and frequent trading of portfolio securities. A higher portfolio turnover rate increases transaction costs and as a result may adversely impact the Fund's performance and may:
o increase share price volatility and
o result in additional tax consequences for Fund shareholders.
GARTMORE NORTHPOINTE FUNDS | 11
SECTION 2 FUND DETAILS (CONT.)
TEMPORARY INVESTMENTS - Each of the Funds generally will be fully invested in accordance with its objective and strategies. However, pending investment of cash balances, or if the Fund's management believes that business, economic, political or financial conditions warrant, a Fund may invest without limit in cash or money market cash equivalents, including:
o short-term U.S. government securities;
o certificates of deposit, bankers' acceptances and interest-bearing savings deposits of commercial banks;
o prime quality commercial paper;
o repurchase agreements covering any of the securities in which the Fund may invest directly and
o shares of other investment companies that invest in securities in which the Fund may invest, to the extent permitted by applicable law.
The use of temporary investments prevents a Fund from fully pursuing its investment objective, and the Fund may miss potential market upswings.
The Statement of Additional Information ("SAI") contains more information on the Funds' principal investments and strategies and can be requested using the addresses and telephone numbers on the back of this prospectus.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the Securities and Exchange Commission. A description of the Funds' policies and procedures regarding the release of portfolio holdings information is available in the Funds' SAI.
12 | GARTMORE NORTHPOINTE FUNDS
SECTION 3 FUND MANAGEMENT
INVESTMENT ADVISER AND SUBADVISER
Gartmore Mutual Fund Capital Trust (the "Adviser"), located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is the Funds' investment adviser. The Adviser was organized in 1999 as an investment adviser for mutual funds.
NorthPointe Capital, LLC ("NorthPointe"), 101 West Beaver Road, Suite 745, Troy, Michigan 48084 is the Funds' subadviser. Subject to the supervision of the Adviser and the Trustees, NorthPointe manages each Fund's assets in accordance with each Fund's investment objective and strategies. NorthPointe makes investment decisions for the Funds and, in connection with such investment decisions, places purchase and sell orders for securities. NorthPointe was organized in 1999 and also manages other Gartmore Funds, as well as institutional accounts.
The Adviser and NorthPointe are part of NWD Investments, the asset management operations of Nationwide Mutual Insurance Company.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of the Adviser, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase the Adviser (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with the Adviser. The purchase of the Adviser by NFS may be deemed to constitute a change of control, terminating the Adviser's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with the Adviser with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with the Adviser are subject to the approval of the Funds' respective shareholders. The sale of the Adviser to NFS currently is anticipated to close during the second quarter of 2007.
In connection with the transactions proposed pursuant to the Purchase Agreement, the Board of Trustees of the Trust has also approved a new subadvisory agreement with NorthPointe with respect to the NorthPointe Small Cap Growth Fund and NorthPointe Small Cap Value Fund. The new subadvisory agreement is subject to the approval of the Funds' respective shareholders.
As of September 29, 2006, Gartmore Funds and its U.S. operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore U.K.) or other Gartmore international businesses. Certain Gartmore U.S. companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore U.K.
The Funds pay the Adviser a management fee, based on each Fund's average daily net assets. From its management fee, the Adviser pays NorthPointe a subadvisory fee based on each Fund's average daily net assets. The total aggregate management and subadvisory fees paid by each Fund for the fiscal year ended October 31, 2006, expressed as a percentage of a Fund's average daily net assets and taking into account any applicable waivers, were as follows:
--------------------------------------------------------------------------------
ACTUAL MANAGEMENT ACTUAL SUBADVISORY
FUND FEE PAID FEE PAID
--------------------------------------------------------------------------------
NorthPointe Small Cap
Growth Fund 0.95% 0.95%
--------------------------------------------------------------------------------
NorthPointe Small Cap
Value Fund 0.85% 0.85%
--------------------------------------------------------------------------------
|
The total annual advisory fees (as a percentage of average daily net assets) that can be paid to the Adviser and Subadviser (as defined below) are as follows:
--------------------------------------------------------------------------------
ADVISORY SUBADVISORY
FEE FEE
--------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 0.95% 0.95%
--------------------------------------------------------------------------------
NorthPointe Small Cap Value Fund 0.85% 0.85%
--------------------------------------------------------------------------------
|
A discussion regarding the basis for the Board of Trustees' approval of the investment advisory and subadvisory agreements for the Funds will be available in the Funds' semi-annual report to shareholders, which will cover the period from November 1, 2006 to April 30, 2007.
PORTFOLIO MANAGEMENT
PORTFOLIO MANAGERS - NORTHPOINTE SMALL CAP
GROWTH FUND
Carl Wilk, senior portfolio manager, and Karl Knas, portfolio manager and senior equity analyst, are co-portfolio managers of the Fund.
Carl P. Wilk, CFP joined NorthPointe in April 2002. Prior to April 2002, Mr. Wilk was a Senior Portfolio Manager and Partner of Munder Capital Management and portfolio manager of the Munder MicroCap Equity Fund, as well as co-manager of the Munder Small Company Growth Fund. Mr. Wilk also managed the small company focus style for institutional and wrap accounts for Munder Capital Management. Mr. Wilk has over 17 years experience in managing micro and small capitalization securities. He currently also manages or co-manages the Gartmore Micro Cap Equity Fund and the Gartmore Small Cap Leaders Fund.
GARTMORE NORTHPOINTE FUNDS | 13
SECTION 3 FUND MANAGEMENT (CONT.)
Karl Knas, CPA, joined NorthPointe in March 2003. From August 2001 to March 2003, Mr. Knas worked for SoundView Technology Group as an equity research analyst. From February 2001 to August 2001, he was at Salomon Smith Barney as an equity research associate. Prior to February 2001, he was in business development at Telution, a software company.
PORTFOLIO MANAGERS - NORTHPOINTE SMALL CAP VALUE FUND
Jeffrey C. Petherick and Mary C. Champagne are co-portfolio managers of the Fund. Mr. Petherick and Ms. Champagne joined NorthPointe in January 2000 and currently co-manage several Gartmore Funds. Between June 1995 and December 1999, they co-managed institutional and retail small cap value equity investments at Loomis, Sayles & Company, L.P., including the Loomis Sayles Small Cap Value Fund. They also co-manage the Gartmore Large Cap Value Fund and the Gartmore Value Opportunities Fund.
The SAI provides additional information about each portfolio manager's compensation, other accounts managed by the portfolio manager and the portfolio manager's ownership of securities in the Fund(s) managed by the portfolio manager, if any.
MULTI-MANAGER STRUCTURE
The Adviser and the Trust have received an exemptive order from the U.S. Securities and Exchange Commission for a multi-manager structure that allows the Adviser to hire, replace or terminate a subadviser (excluding hiring a subadviser which is an affiliate of the Adviser) without the approval of shareholders. The order also allows the Adviser to revise a subadvisory agreement with a non-affiliated subadviser with the approval of the Board of Trustees but without shareholder approval. Currently, the Funds are subadvised by NorthPointe, but if a new non-affiliated subadviser is hired for any of the Funds, shareholders will receive information about the new subadviser within 90 days of the change. The exemptive order allows these Funds greater flexibility and enables them to operate more efficiently.
In instances where the Adviser hires a subadviser, the Adviser performs the following oversight and evaluation services to any subadvised Funds:
o initial due diligence on prospective Fund subadvisers;
o monitoring subadviser performance, including ongoing analysis and periodic consultations;
o communicating performance expectations and evaluations to the subadvisers and
o making recommendations to the Board of Trustees regarding renewal, modification or termination of a subadviser's contract.
The Adviser does not expect to frequently recommend subadviser changes. Where the Adviser does recommend the hiring of a subadviser, the Adviser periodically provides written reports to the Board of Trustees regarding its evaluation and monitoring. Although the Adviser monitors the subadviser's performance, there is no certainty that any subadviser or any of these Funds will obtain favorable results at any given time.
14 | GARTMORE NORTHPOINTE FUNDS
SECTION 4 INVESTING WITH GARTMORE FUNDS
o which share classes are available to you;
o how long you expect to own your shares;
o how much you intend to invest;
o total costs and expenses associated with a particular share class and
o whether you qualify for any reduction or waiver of sales charges.
The Gartmore Funds offer several different share classes each with different price and cost features. The table below compares Class A, Class B and Class C shares, which are available to all investors. AS OF THE DATE OF THIS PROSPECTUS, THE NORTHPOINTE SMALL CAP GROWTH FUND DOES NOT OFFER CLASS A, CLASS B OR CLASS C SHARES. EXISTING SHAREHOLDERS OF CLASS A, CLASS B AND CLASS C SHARES MAY NONETHELESS REINVEST DIVIDENDS AND DISTRIBUTIONS IN SUCH CLASSES.
Class R, Institutional Service Class and Institutional Class shares are available only to certain investors. For eligible investors, Class R, Institutional Service Class shares and Institutional Class shares may be more suitable than Class A, Class B or Class C shares.
The NorthPointe Small Cap Value Fund offers only Institutional Class shares.
Class A shares of the NorthPointe Small Cap Growth Fund may be most appropriate for investors who want lower fund expenses or those who qualify for reduced front-end sales charges or a waiver of sales charges.
FRONT-END SALES CHARGES FOR CLASS A SHARES
SALES CHARGE AS A PERCENTAGE OF
-------------------------------
DEALER
NET AMOUNT COMMISSION AS
AMOUNT OF OFFERING INVESTED PERCENTAGE OF
PURCHASE PRICE (APPROXIMATELY) OFFERING PRICE
-------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
-------------------------------------------------------------------
$50,000 to $99,999 4.75 4.99 4.00
-------------------------------------------------------------------
$100,000 to $249,999 3.50 3.63 3.00
-------------------------------------------------------------------
$250,000 to $499,999 2.50 2.56 2.00
-------------------------------------------------------------------
$500,000 to $999,999 2.00 2.04 1.75
-------------------------------------------------------------------
$1 million or more None None None*
-------------------------------------------------------------------
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* Dealer may be eligible for a finders fee as described in "Purchasing Class A Shares without a Sales Charge" below.
REDUCTION AND WAIVER OF CLASS A SALES CHARGES
If you qualify for a reduction or waiver of Class A sales charges, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. The value of cumulative quantity discount eligible shares equals the cost or current value of those shares, whichever is higher. The current value of shares is determined by multiplying the number of shares by their current NAV. In order to obtain a sales charge reduction, you may need to provide your financial intermediary or the Fund's transfer agent, at the time of purchase, with information regarding shares of the Funds held in other accounts which may be eligible for aggregation. Such information may include account statements or other records regarding shares of the Funds held in (i) all accounts (e.g., retirement accounts) with the Funds and your financial intermediary; (ii) accounts with other financial intermediaries and (iii) accounts in the name of immediate family household members (spouse and children under 21). You should retain any records necessary to substantiate historical costs because the Fund, its transfer agent and financial intermediaries may not maintain this information. Otherwise, you may not receive the reduction or waiver. See "Reduction of Class A Sales Charges" and "Waiver of Class A Sales Charges" below and "Reduction of Class A Sales Charges" and "Net Asset Value Purchase Privilege (Class A Shares Only)" in the SAI for more information. This information regarding breakpoints is also available free of charge at www.nwdfunds.com/invest/salesinformation.
REDUCTION OF CLASS A SALES CHARGES
Investors may be able to reduce or eliminate front-end sales charges on Class A shares through one or more of these methods:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o RIGHTS OF ACCUMULATION. To qualify for the reduced Class A sales charge that would apply to a larger purchase than you are currently making (shown in the table above), you and other family members living at the same address can add the current value of any Class A, Class D, Class B or Class C shares in all Gartmore Funds (except Gartmore Money Market Fund) that you currently own or are currently purchasing to the value of your Class A purchase.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds of an insurance policy issued by any Nationwide Insurance company to purchase Class A shares, you pay one-half of the published sales charge, as long as you make your investment within 60 days of receiving the proceeds.
o SHARE REPURCHASE PRIVILEGE. If you redeem Fund shares from your account, you qualify for a one-time reinvestment privilege. You may reinvest some or all of the proceeds in shares of the same class without paying an additional sales charge within 30 days of redeeming shares on which you previously paid a sales charge. (Reinvestment does not affect the amount of any capital gains tax due. However, if you realize a loss on your redemption and then reinvest all or some of the proceeds, all or a portion of that loss may not be tax deductible.)
GARTMORE NORTHPOINTE FUNDS | 15
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
o LETTER OF INTENT DISCOUNT. If you declare in writing that you or a group of family members living at the same address intend to purchase at least $50,000 in Class A shares (except the Gartmore Money Market Fund) during a 13-month period, your sales charge is based on the total amount you intend to invest. You are permitted to backdate the letter in order to include purchases made during the previous 90 days. You can also combine your purchase of Class A, Class B and Class C shares with your purchases of Class D shares to fulfill your Letter of Intent. You are not legally required to complete the purchases indicated in your Letter of Intent. However, if you do not fulfill your Letter of Intent, additional sales charges may be due and shares in your account would be liquidated to cover those sales charges.
Front-end sales charges on Class A shares are waived for the following purchasers:
o investors purchasing shares through an unaffiliated brokerage firm that has an agreement with Gartmore Distribution Services, Inc. (the "Distributor") to waive sales charges;
o directors, officers, full-time employees, sales representatives and their employees and investment advisory clients of a broker-dealer that has a dealer/selling agreement with the Distributor;
o any investor who pays for shares with proceeds from sales of Gartmore Fund Class D shares (Class D shares are offered by other Gartmore Funds, but not these Funds);
o retirement plans;
o investment advisory clients of the Adviser, Gartmore SA Capital Trust and their affiliates and
o directors, officers, full-time employees (and their spouses, children or immediate relatives) of sponsor groups that may be affiliated with the Nationwide Insurance and Nationwide Financial companies from time to time.
PURCHASING CLASS A SHARES WITHOUT A SALES CHARGE
Purchases of $1 million or more of Class A shares have no front-end sales charge. You can purchase $1 million or more in Class A shares in one or more of the funds offered by the Trust (including the Funds in this prospectus) at one time. Or, you can utilize the Rights of Accumulation Discount and Letter of Intent Discount as described above. However, a contingent deferred sales charge (CDSC) of up to 0.50% applies if a "finders fee" is paid by the Distributor to your financial adviser or intermediary and you redeem your shares within 18 months of purchase. The CDSC covers the finders fee paid to the selling dealer.
The CDSC also does not apply:
o if you are eligible to purchase Class A shares without a sales charge for another reason; or
o no finders fee was paid or
o to shares acquired through reinvestment of dividends or capital gains distributions.
CONTINGENT DEFERRED SALES CHARGE ON CERTAIN REDEMPTIONS OF CLASS A SHARES
-------------------------------------------------------------------------------- AMOUNT OF $1 MILLION $25 MILLION PURCHASE TO $24,999,999 OR MORE -------------------------------------------------------------------------------- If sold within 18 months 18 months -------------------------------------------------------------------------------- Amount of CDSC 0.50% 0.25% -------------------------------------------------------------------------------- |
Any CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC you pay. Please see "Waiver of Contingent Deferred Sales Charges-Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
The CDSC for Class A shares of the NorthPointe Small Cap Growth Fund is described above; however, the CDSC for Class A shares of other Gartmore Funds may be different and are described in their respective prospectuses. If you purchase more than one Gartmore Fund and subsequently redeem those shares, the amount of the CDSC is based on the specific combination of Gartmore Funds purchased and is proportional to the amount you redeem from each Gartmore Fund.
The CDSC is waived on:
o the redemption of Class A, Class B or Class C shares purchased through reinvested dividends or distributions;
o Class B shares which are qualifying redemptions of Class B shares under the Automatic Withdrawal Program;
o Class A, Class B or Class C shares redeemed following the death or disability of a shareholder, provided the redemption occurs within one year of the shareholder's death or disability;
o mandatory withdrawals of Class A, Class B or Class C shares from traditional IRA accounts after age 70-1/2 and for other required distributions from retirement accounts and
o redemptions of Class C shares from retirement plans offered by retirement plan administrators that maintain an agreement with the Funds or the Distributor.
16 | GARTMORE NORTHPOINTE FUNDS
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
If a CDSC is charged when you redeem your Class B or Class C shares, and you then reinvest the proceeds in Class B or Class C shares within 30 days, shares equal to the amount of the CDSC are re-deposited into your new account.
If you qualify for a waiver of a CDSC, you must notify Customer Service, your financial adviser or other intermediary at the time of purchase and must also provide any required evidence showing that you qualify. For more complete information, see the SAI.
CLASS B SHARES
Class B shares may be appropriate if you do not want to pay a front-end sales charge, are investing less than $100,000 and anticipate holding your shares for longer than six years.
If you redeem Class B shares within six years of purchase you must pay a CDSC (if you are not entitled to a waiver). The amount of the CDSC decreases as shown in the following table:
7 YEARS
SALE WITHIN 1 YEAR 2 YEARS 3 YEARS 4 YEARS 5 YEARS 6 YEAR OR MORE
--------------------------------------------------------------------------------
Sales charge 5% 4% 3% 3% 2% 1% 0%
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CONVERSION OF CLASS B SHARES
After you hold your Class B shares for seven years, they automatically convert at no charge into Class A shares, which have lower fund expenses. Shares purchased through the reinvestment of dividends and other distributions are also converted. Because the share price of Class A shares is usually higher than that of Class B shares, you may receive fewer Class A shares than the Class B shares converted; however, the total dollar value is the same.
CLASS C SHARES
Class C shares may be appropriate if you are uncertain how long you will hold your shares. If you redeem your Class C shares within the first year after you purchase them you must pay a CDSC of 1%.
For both Class B and Class C shares, the CDSC is based on the original purchase price or the current market value of the shares being redeemed, whichever is less. If you redeem a portion of your shares, shares that are not subject to a CDSC are redeemed first, followed by shares that you have owned the longest. This minimizes the CDSC that you pay. See "Waiver of Contingent Deferred Sales Charges--Class A, Class B and Class C Shares" for a list of situations where a CDSC is not charged.
SHARE CLASSES AVAILABLE ONLY TO INSTITUTIONAL ACCOUNTS
The NorthPointe Small Cap Growth Fund offers Class R, Service Class, Institutional Service Class and Institutional Class shares. The NorthPointe Small Cap Value Fund offers only Institutional Class shares. Only certain types of entities and selected individuals are eligible to purchase shares of these classes.
If an institution or retirement plan has hired an intermediary and is eligible to invest in more than one class of shares, the intermediary can help determine which share class is appropriate for that retirement plan or other institutional account. Plan fiduciaries should consider their obligations under ERISA when determining which class is appropriate for the retirement plan.
Other fiduciaries should also consider their obligations in determining the appropriate share class for a customer including:
o the level of distribution and administrative services the plan requires,
o the total expenses of the share class and
o the appropriate level and type of fee to compensate the intermediary. An intermediary may receive different compensation depending on which class is chosen.
CLASS R SHARES
Class R Shares ARE AVAILABLE to retirement plans including:
o 401(k) plans,
o 457 plans,
o 403(b) plans,
o profit sharing and money purchase pension plans,
o defined benefit plans,
o non-qualified deferred compensation plans and
o other retirement accounts in which the retirement plan or the retirement plan's financial service firm has an agreement with the Distributor to use Class R shares.
The above-referenced plans are generally small and mid-sized retirement plans that have at least $1 million in assets and shares held through omnibus accounts that are represented by an intermediary such as a broker, third-party administrator, registered investment adviser or other plan service provider.
Class R shares ARE NOT AVAILABLE to:
o institutional non-retirement accounts,
o traditional and Roth IRAs,
o Coverdell Education Savings Accounts,
o SEPs and SAR-SEPs,
o SIMPLE IRAs,
o one-person Keogh plans,
o individual 403(b) plans or
o 529 Plan accounts.
GARTMORE NORTHPOINTE FUNDS | 17
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
INSTITUTIONAL SERVICE CLASS SHARES
Institutional Service Class shares are available for purchase only by the following:
o retirement plans advised by financial professionals who are not associated with brokers or dealers primarily engaged in the retail securities business and rollover individual retirement accounts from such plans,
o retirement plans for which third-party administrators provide recordkeeping services and are compensated by the Funds for these services,
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are part of a program that collects an administrative services fee,
o registered investment advisers investing on behalf of institutions and high net-worth individuals where the adviser is compensated by the Funds for providing services or
o life insurance separate accounts using the investment to fund benefits for variable annuity contracts issued to governmental entities as an investment option for 457 or 401(k) plans.
INSTITUTIONAL CLASS SHARES
Institutional Class shares are available for purchase only by the following:
o funds of funds offered by the Distributor or other affiliates of the Fund;
o retirement plans for which no third-party administrator receives compensation from the Funds;
o institutional advisory accounts of the Adviser or its affiliates, those accounts which have client relationships with an affiliate of the Adviser, its affiliates and their corporate sponsors and subsidiaries and related retirement plans;
o rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for trust accounts for which it has authority to make investment decisions as long as the accounts are not part of a program that requires payment of Rule 12b-1 or administrative service fees to the financial institution;
o registered investment advisers investing on behalf of institutions and high net-worth individuals whose advisers derive compensation for advisory services exclusively from clients or
o high net-worth individuals who invest directly without using the services of a broker, investment adviser or other financial intermediary.
SALES CHARGES AND FEES
SALES CHARGES
Sales charges, if any, are paid to the Distributor. These fees are either kept or paid to your financial adviser or other intermediary.
DISTRIBUTION AND SERVICES FEES
Each Fund has adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940, which permits Class A, Class B, Class C and Class R shares of the Funds to compensate the Distributor for expenses associated with distributing and selling shares and providing shareholder services through distribution and/or shareholder servicing fees. These fees are paid to the Distributor and are either kept or paid to your financial adviser or other intermediary for distribution and shareholder services. Institutional Service Class and Institutional Class shares pay no 12b-1 fees.
These 12b-1 fees are in addition to applicable sales charges and are paid from the Funds' assets on an ongoing basis. (The fees are accrued daily and paid monthly.) As a result, 12b-1 fees increase the cost of your investment and over time may cost more than other types of sales charges. Under the Distribution Plan, Class A, Class B, Class C and Class R shares pay the Distributor annual amounts not exceeding the following:
--------------------------------------------------------------------------------
CLASS AS A % OF DAILY NET ASSETS
--------------------------------------------------------------------------------
Class A shares 0.25% (distribution or service fee)
--------------------------------------------------------------------------------
Class B shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class C shares 1.00% (0.25% service fee)
--------------------------------------------------------------------------------
Class R shares 0.50% (0.25% of which may be either a
distribution or service fee)
--------------------------------------------------------------------------------
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ADMINISTRATIVE SERVICES FEES
Class A, Class R and Institutional Service Class shares of the Funds are subject to fees pursuant to an Administrative Services Plan adopted by the Board of Trustees of the Trust. (These fees are in addition to Rule 12b-1 fees for Class A and Class R shares as described above.) These fees are paid by these Funds to broker-dealers or other financial intermediaries who provide administrative support services to beneficial shareholders on behalf of the Funds. Under the Administrative Services Plan, a Fund may pay a broker-dealer or other intermediary a maximum annual administrative services fee of 0.25% for Class A, Class R and Institutional Service Class shares; however, many intermediaries do not charge the maximum permitted fee or even a portion thereof.
Because these fees are paid out of a Fund's Class A, Class R and Institutional Service Class assets on an ongoing basis, these fees will increase the cost of your investment in such share class over time and may cost you more than paying other types of fees.
18 | GARTMORE NORTHPOINTE FUNDS
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
REVENUE SHARING
The Adviser and/or its affiliates (collectively, "NWD Investments") may make payments for marketing, promotional or related services provided by broker-dealers and other financial intermediaries that sell shares of the Trust or which include them as investment options for their respective customers.
These payments are often referred to as "revenue sharing payments." The existence or level of such payments may be based on factors that include, without limitation, differing levels or types of services provided by the broker-dealer or other financial intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a recommended or preferred list, and/or access to an intermediary's personnel and other factors. Revenue sharing payments are paid from NWD Investments' own legitimate profits and other of its own resources (not from the Funds) and may be in addition to any Rule 12b-1 payments that are paid to broker-dealers and other financial intermediaries. The Board of Trustees of the Funds will monitor these revenue sharing arrangements as well as the payment of advisory fees paid by the Funds to their respective advisers to ensure that the levels of such advisory fees do not involve the indirect use of the Funds' assets to pay for marketing, promotional or related services. Because revenue sharing payments are paid by NWD Investments, and not from the Funds' assets, the amount of any revenue sharing payments is determined by NWD Investments.
In addition to the revenue sharing payments described above, NWD Investments may offer other incentives to sell shares of the Funds in the form of sponsorship of educational or other client seminars relating to current products and issues, assistance in training or educating an intermediary's personnel, and/or entertainment or meals. These payments may also include, at the direction of a retirement plan's named fiduciary, amounts to a retirement plan intermediary to offset certain plan expenses or otherwise for the benefit of plan participants and beneficiaries.
The recipients of such payments may include:
o the Distributor and other affiliates of the Adviser;
o broker-dealers;
o financial institutions and
o other financial intermediaries through which investors may purchase shares of a Fund.
Payments may be based on current or past sales, current or historical assets or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to sell shares of a Fund to you instead of shares of funds offered by competing fund families.
Contact your financial intermediary for details about revenue sharing payments it may receive.
Notwithstanding the revenue sharing payments described above, all investment advisers and subadvisers to the Trust are prohibited from considering a broker-dealer's sale of any of the Trust's shares in selecting such broker-dealer for the execution of Fund portfolio transactions, except as may be specifically permitted by law.
Fund portfolio transactions nevertheless may be effected with broker-dealers who coincidentally may have assisted customers in the purchase of Fund shares, although neither such assistance nor the volume of shares sold of the Trust or any affiliated investment company is a qualifying or disqualifying factor in the investment adviser's selection of such broker-dealer for portfolio transaction execution.
CONTACTING GARTMORE FUNDS
CUSTOMER SERVICE REPRESENTATIVES are available 8 a.m. to 9 p.m. Eastern Time, Monday through Friday at 800-848-0920.
AUTOMATED VOICE RESPONSE Call 800-848-0920, 24 hours a day, seven days a week, for easy access to mutual fund information. Choose from a menu of options to:
o make transactions;
o hear fund price information and
o obtain mailing and wiring instructions.
INTERNET Go to WWW.NWDFUNDS.COM 24 hours a day, seven days a week, for easy access to your mutual fund accounts. The website provides instructions on how to select a password and perform transactions. On the website, you can:
o download Fund prospectuses;
o obtain information on the Gartmore Funds;
o access your account information and
o request transactions, including purchases, redemptions and exchanges.
BY REGULAR MAIL Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205.
BY OVERNIGHT MAIL Gartmore Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
BY FAX 614-428-3278
GARTMORE NORTHPOINTE FUNDS | 19
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
FUND TRANSACTIONS--CLASS A, CLASS B, AND CLASS C SHARES
All transaction orders must be received by the Funds' agent in Columbus, Ohio or an authorized intermediary prior to the calculation of each Fund's NAV to receive that day's NAV.
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HOW TO BUY SHARES HOW TO EXCHANGE* OR SELL** SHARES
BE SURE TO SPECIFY THE CLASS OF SHARES YOU WISH TO PURCHASE. * EXCHANGE PRIVILEGES MAY BE AMENDED OR DISCONTINUED UPON
EACH FUND MAY REJECT ANY ORDER TO BUY SHARES AND MAY SUSPEND 60-DAY WRITTEN NOTICE TO SHAREHOLDERS.
THE OFFERING OF SHARES AT ANY TIME.
** A MEDALLION SIGNATURE GUARANTEE MAY BE REQUIRED. SEE
"MEDALLION SIGNATURE GUARANTEE" BELOW.
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THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has THROUGH AN AUTHORIZED INTERMEDIARY. The Distributor has
relationships with certain brokers and other financial relationships with certain brokers and other financial
intermediaries who are authorized to accept purchase, exchange intermediaries who are authorized to accept purchase, exchange
and redemption orders for the Funds. Your transaction is and redemption orders for the Funds. Your transaction is
processed at the NAV next calculated after the Funds' agent or processed at the NAV next calculated after the Funds' agent or
an authorized intermediary receives your order in proper form. an authorized intermediary receives your order in proper form.
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BY MAIL. Complete an application and send with a check made BY MAIL OR FAX. You may request an exchange or redemption by
payable to: Gartmore Funds. Payment must be made in U.S. mailing or faxing a letter to Gartmore Funds. The letter must
dollars and drawn on a U.S. bank. THE FUNDS DO NOT ACCEPT CASH, include your account number(s) and the name(s) of the Fund(s)
STARTER CHECKS, THIRD-PARTY CHECKS, TRAVELERS' CHECKS, CREDIT you wish to exchange from and to. The letter must be signed by
CARD CHECKS OR MONEY ORDERS. all account owners. We reserve the right to request original
documents for any faxed requests.
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BY TELEPHONE. You will have automatic telephone privileges BY TELEPHONE. You will have automatic telephone privileges
unless you decline this option on your application. The Funds unless you decline this option on your application. The Funds
follow procedures to confirm that telephone instructions are follow procedures to confirm that telephone instructions are
genuine and will not be liable for any loss, injury, damage or genuine and will not be liable for any loss, injury, damage or
expense that results from executing such instructions. The expense that results from executing such instructions. The Funds
Funds may revoke telephone privileges at any time, without may revoke telephone privileges at any time, without notice to
notice to shareholders. shareholders. For redemptions, shareholders who own shares in an
IRA account should call 800-848-0920.
ADDITIONAL INFORMATION FOR SELLING SHARES. A check made payable
to the shareholder(s) of record will be mailed to the address of
record.
The Funds may record telephone instructions to redeem shares and
may request redemption instructions in writing, signed by all
shareholders on the account.
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ON-LINE. Transactions may be made through the Gartmore Funds' ON-LINE. Transactions may be made through the Gartmore Funds'
website. However, the Funds may discontinue on-line website. However, the Funds may discontinue on-line transactions
transactions of Fund shares at any time. of Fund shares at any time.
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BY BANK WIRE. You may have your bank transmit funds by federal BY BANK WIRE. The Funds can wire the proceeds of your redemption
funds wire to the Funds' custodian bank. (The authorization directly to your account at a commercial bank. A voided check
will be in effect unless you give the Funds written notice of must be attached to your application. (The authorization will be
its termination.) in effect unless you give the Funds written notice of its
termination.)
o if you choose this method to open a new account, you must
call our toll-free number before you wire your investment o your proceeds typically will be wired to your bank on the next
and arrange to fax your completed application. business day after your order has been processed.
o your bank may charge a fee to wire funds. o Gartmore Funds deducts a $20 service fee from the redemption
proceeds for this service.
o the wire must be received by 4:00 p.m. in order to receive
the current day's NAV. o your financial institution may also charge a fee for receiving
the wire.
o funds sent outside the U.S. may be subject to higher fees.
BANK WIRE IS NOT AN OPTION FOR EXCHANGES.
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BY AUTOMATED CLEARING HOUSE (ACH). You can fund your Gartmore BY AUTOMATED CLEARING HOUSE (ACH). Your redemption proceeds can
Funds' account with proceeds from your bank via ACH on the be sent to your bank via ACH on the second business day after
second business day after your purchase order has been your order has been processed. A voided check must be attached
processed. A voided check must be attached to your application. to your application. Money sent through ACH should reach your
Money sent through ACH typically reaches Gartmore Funds from bank in two business days. There is no fee for this service.
your bank in two business days. There is no fee for this (The authorization will be in effect unless you give the Funds
service. (The authorization will be in effect unless you give written notice of its termination.)
the Funds written notice of its termination.)
ACH IS NOT AN OPTION FOR EXCHANGES.
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RETIREMENT PLAN PARTICIPANTS should contact their retirement RETIREMENT PLAN PARTICIPANTS should contact their retirement
plan administrator regarding transactions. Retirement plans or plan administrator regarding transactions. Retirement plans or
their administrators wishing to conduct transactions should their administrators wishing to conduct transactions should call
call our toll-free number. Eligible entities or individuals our toll-free number. Eligible entities or individuals wishing
wishing to conduct transactions in Institutional Service Class to conduct transactions in Institutional Service Class or
or Institutional Class shares should call our toll-free number. Institutional Class shares should call our toll-free number.
|
20 | GARTMORE NORTHPOINTE FUNDS
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
BUYING SHARES
SHARE PRICE
The net asset value or "NAV" is the value of a single share. A separate NAV is calculated for each share class of a Fund. The NAV is:
o calculated at the close of regular trading (usually 4 p.m. Eastern Time) each day the New York Stock Exchange is open;
o generally determined by dividing the total net market value of the securities and other assets owned by a Fund allocated to a particular class, less the liabilities allocated to that class, by the total number of outstanding shares of that class.
The purchase or "offering" price for Fund shares is the NAV (for a particular class) next determined after the order is received by the Fund or its agent, plus any applicable sales charge.
FAIR VALUE PRICING
The Board of Trustees of the Trust has adopted Valuation Procedures governing the method by which individual portfolio securities held by the Funds are valued in order to determine each Fund's NAV. The Valuation Procedures provide that each Fund's assets are valued primarily on the basis of the market quotations. Where such market quotations are either unavailable or are deemed by the Adviser to be unreliable, a Fair Valuation Committee, consisting of employees of the Adviser, meets to determine a manual "fair valuation" in accordance with the Valuation Procedures. In addition, the Valuation Committee will "fair value" securities whose value is affected by a "significant event." Pursuant to the Valuation Procedures, any "fair valuation" decisions are subject to the review of the Board of Trustees.
A "significant event" is defined by the Valuation Procedures as an event that materially affects the value of a domestic or foreign security that occurs after the close of the principal market on which such security trades but before the calculation of a Fund's NAV. Significant events that could affect individual portfolio securities may include corporate actions such as reorganizations, mergers and buy-outs, corporate announcements on earnings, significant litigation, regulatory news such as government approvals and news relating to natural disasters affecting the issuer's operations. Significant events that could affect a large number of securities in a particular market may include significant market fluctuations, market disruptions or market closings, governmental actions or other developments or natural disasters or armed conflicts that affect a country or region.
Due to the time differences between the closings of the relevant foreign securities exchanges and the time that a Fund's NAV is calculated, a Fund may fair value its foreign investments more frequently than it does other securities. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on a Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust has determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable and may trigger fair value pricing for certain securities. Consequently, fair value pricing of foreign securities may occur on a daily basis, for instance, using data furnished by an independent pricing service that draws upon, among other information, the market values of foreign investments. Therefore, the fair values assigned to a Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
By fair valuing a security whose price may have been affected by significant events or by news after the last market pricing of the security, each Fund attempts to establish a price that they might reasonably expect to receive upon the current sale of that security. These procedures are intended to help ensure that the prices at which a Fund's shares are purchased and redeemed are fair, and do not result in dilution of shareholder interests or other harm to shareholders.
IN-KIND PURCHASES
Each Fund may accept payment for shares in the form of securities that are permissible investments for the Fund.
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving Day
o Christmas Day
GARTMORE NORTHPOINTE FUNDS | 21
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
CLASS A, CLASS B AND CLASS C SHARES To open an account $ 2,000 (per Fund) To open an IRA account $ 1,000 (per Fund) Additional investments $ 100 (per Fund) To start an Automatic Asset Accumulation Plan $ 1,000 Additional Investments (Automatic Asset Accumulation Plan) $ 50 -------------------------------------------------------------------------------- CLASS R SHARES To open an account No Minimum Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL SERVICE CLASS SHARES To open an account $ 50,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- INSTITUTIONAL CLASS SHARES To open an account $1,000,000 (per Fund) Additional investments No Minimum -------------------------------------------------------------------------------- |
CUSTOMER IDENTIFICATION INFORMATION
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person that opens a new account and to determine whether such person's name appears on government lists of known or suspected terrorists and terrorist organizations.
As a result, unless such information is collected by the broker-dealer or other financial intermediary pursuant to an agreement, the Funds must obtain the following information for each person that opens a new account:
o name,
o date of birth (for individuals),
o residential or business street address (although post office boxes are still permitted for mailing) and
o Social Security number, taxpayer identification number or other identifying number.
You may also be asked for a copy of your driver's license, passport or other identifying document in order to verify your identity. In addition, it may be necessary to verify your identity by cross-referencing your identification information with a consumer report or other electronic database. Additional information may be required to open accounts for corporations and other entities.
Federal law prohibits the Funds and other financial institutions from opening a new account unless they receive the minimum identifying information listed above. After an account is opened, the Funds may restrict your ability to purchase additional shares until your identity is verified. The Funds may close your account or take other appropriate action if they are unable to verify your identity within a reasonable time. If your account is closed for this reason, your shares will be redeemed at the NAV next calculated after the account is closed.
ACCOUNTS WITH LOW BALANCES
Maintaining small accounts is costly for the Funds and may have a negative effect on performance. Shareholders are encouraged to keep their accounts above each Fund's minimum.
o If the value of your account falls below $2,000 ($1,000 for IRA accounts), you are generally subject to a $5 quarterly fee. Shares from your account are redeemed each quarter to cover the fee, which is returned to the Fund to offset small account expenses. Under some circumstances, each Fund may waive the quarterly fee.
o Each Fund reserves the right to redeem your remaining shares and close your account if a redemption of shares brings the value of your account below $2,000 ($1,000 for IRA accounts). In such cases, you will be notified and given 60 days to purchase additional shares before the account is closed.
EXCHANGING SHARES
You may exchange your Fund shares for shares of any Gartmore Fund that is currently accepting new investments as long as:
o both accounts have the same registration,
o your first purchase in the new fund meets its minimum investment requirement and
o you purchase the same class of shares. For example, you may exchange between Class A shares of any Gartmore Funds, but may not exchange between Class A shares and Class B shares.
The exchange privileges may be amended or discontinued upon 60-day written notice to shareholders.
Generally, there are no sales charges for exchanges of Class D, Class B, Class C, Class R, Service Class, Institutional Service Class or Institutional Class shares. However,
o if you exchange from Class A shares of a Fund with a lower sales charge to a Fund with a higher sales charge, you may have to pay the difference in the two sales charges.
o if you exchange Class A shares that are subject to a CDSC, and then redeem those shares within 18 months of the original purchase, the CDSC applicable to the original Fund is charged.
22 | GARTMORE NORTHPOINTE FUNDS
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
For purposes of calculating a CDSC, the length of ownership is measured from the date of original purchase and is not affected by any permitted exchange (except exchanges to Gartmore Money Market Fund.)
EXCHANGES INTO GARTMORE MONEY MARKET FUND
You may exchange between Class A, Class B, Class C or Institutional Service Class shares and the Prime Shares of the Gartmore Money Market Fund. If your original investment was in Prime Shares, any exchange of Prime Shares you make for Class A, Class D, Class B or Class C shares of another Fund may require you to pay the sales charge applicable to such new shares. In addition, if you exchange shares subject to a CDSC, the length of time you own Prime Shares of the Gartmore Money Market Fund is not included for purposes of determining the CDSC. Redemptions from the Gartmore Money Market Fund are subject to any CDSC that applies to the original purchase.
AUTOMATIC WITHDRAWAL PROGRAM
You may elect to automatically may redeem shares in Class A, Class D, Class B, Class C, Prime Shares and IRA Class in a minimum amount of $50. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Transfer Agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while redeeming shares using this program. An automatic withdrawal plan for Class C shares will be subject to any applicable CDSC. If you own Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. More information about the waiver of the CDSC for Class B shares is located in the SAI.
SELLING SHARES
You can sell, or in other words redeem, your Fund shares at any time, subject to the restrictions described below. The price you receive when you redeem your shares is the NAV (minus any applicable sales charges or redemption fee) next determined after the Fund's authorized intermediary or an agent of the Fund receives your properly completed redemption request. The value of the shares you redeem may be worth more or less than their original purchase price depending on the market value of the Fund's investments at the time of the redemption.
You may not be able to redeem your Fund shares or Gartmore Funds may delay paying your redemption proceeds if:
o the New York Stock Exchange is closed (other than customary weekend and holiday closings),
o trading is restricted or
o an emergency exists (as determined by the Securities and Exchange Commission).
Generally, the Fund will pay you for the shares that you redeem within three days after your redemption request is received. Payment for shares that you recently purchased may be delayed up to 10 business days from the purchase date to allow time for your payment to clear. The Fund may delay forwarding redemption proceeds for up to seven days if the account holder:
o is engaged in excessive trading or
o if the amount of the redemption request would disrupt efficient portfolio management or adversely affect the Fund.
If you choose to have your redemption proceeds mailed to you and the redemption check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
Under extraordinary circumstances, a Fund, in its sole discretion, may elect to honor redemption requests by transferring some of the securities held by the Fund directly to an account holder as a redemption in-kind. For more about Gartmore Funds' ability to make a redemption-in-kind, see the SAI.
The Board of Trustees of the Trust has adopted procedures for redemptions in-kind of affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the Fund's current net assets, and are designed so that such redemptions will not favor the affiliated shareholder to the detriment of any other shareholder.
A medallion signature guarantee is required for sales of shares of a Fund in any of the following instances:
o your account address has changed within the last 15 calendar days,
o the redemption check is made payable to anyone other than the registered shareholder,
o the proceeds are mailed to any address other than the address of record or
o the redemption proceeds are being wired to a bank for which instructions are currently not on your account.
GARTMORE NORTHPOINTE FUNDS | 23
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCESSIVE OR SHORT-TERM TRADING
The Gartmore Funds seek to discourage excessive or short-term trading (often described as "market timing"). Excessive trading (either frequent exchanges between Gartmore Funds or sales and repurchases of Gartmore Funds within a short time period) may:
o disrupt portfolio management strategies,
o increase brokerage and other transaction costs and
o negatively affect fund performance.
Each Fund may be more or less affected by short-term trading in Fund shares, depending on various factors such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number, and frequency of trades in Fund shares and other factors. A Fund that invests in foreign securities may be at greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a Fund based on events occurring after the close of a foreign market that may not be reflected in a Fund's NAV (referred to as "arbitrage market timing"). Arbitrage market timing may also be attempted in funds that hold significant investments in small-cap securities, high-yield bonds and other types of investments that may not be frequently traded. There is the possibility that arbitrage market timing, under certain circumstances, may dilute the value of Fund shares if redeeming shareholders receive proceeds (and buying shareholders receive shares) based on NAVs that do not reflect appropriate fair value prices.
The Board of Trustees of the Trust has adopted and implemented the following policies and procedures to detect, discourage and prevent excessive or short-term trading in the Funds:
MONITORING OF TRADING ACTIVITY
The Funds, through the Adviser and/or subadviser and their agents, monitor selected trades and flows of money in and out of the Funds in an effort to detect excessive short-term trading activities. If a shareholder is found to have engaged in excessive short-term trading, the Funds may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's account.
RESTRICTIONS ON TRANSACTIONS
Whenever a Fund is able to identify short-term trades and/or traders, such Fund has broad authority to take discretionary action against market timers and against particular trades and uniformly will apply the short-term trading restrictions to all such trades that the Fund identifies. It also has sole discretion to:
o restrict purchases or exchanges that the Fund or its agents believe constitute excessive trading and
o reject transactions that violate the Fund's excessive trading policies or its exchange limits.
Each Fund has also implemented redemption and exchange fees to discourage excessive trading and to help offset the expense of such trading.
In general:
o an exchange equaling 1% or more of a Fund's NAV may be rejected and
o redemption and exchange fees are imposed on certain Gartmore Funds. These Gartmore Funds will assess either a redemption fee if you redeem your Fund shares or an exchange fee if you redeem your Fund shares into another Gartmore Fund. The short-term trading fees are deducted from the proceeds of the sale of the affected Fund shares.
FAIR VALUATION
The Funds have fair value pricing procedures in place as described above in
Section 4, Investing with Gartmore Funds: Buying Shares- Share Price.
Despite its best efforts, a Fund may be unable to identify or deter excessive trades conducted through certain intermediaries or omnibus accounts that transmit aggregate purchase, exchange and redemption orders on behalf of their customers. In short, a Fund may not be able to prevent all market timing and its potential negative impact.
24 | GARTMORE NORTHPOINTE FUNDS
SECTION 4 INVESTING WITH GARTMORE FUNDS (CONT.)
EXCHANGE AND REDEMPTION FEES
In order to discourage excessive trading, the Gartmore Funds impose exchange and redemption fees on certain funds if you sell or exchange your shares within a designated holding period. The redemption fee is paid directly to the fund from which the shares are being redeemed and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of fund shares. For purposes of determining whether a redemption fee applies, shares that were held the longest are redeemed first. If you exchange assets into a Fund with a redemption/exchange fee, a new period begins at the time of the exchange.
Redemption and exchange fees do not apply to:
o shares redeemed or exchanged under regularly scheduled withdrawal plans;
o shares purchased through reinvested dividends or capital gains;
o shares redeemed (or exchanged into the Gartmore Money Market Fund) following the death or disability of a shareholder. The disability, determination of disability and subsequent redemption must have occurred during the period the fee applied;
o shares redeemed in connection with mandatory withdrawals from traditional IRAs after age 70-1/2 and other required distributions from retirement accounts;
o shares redeemed or exchanged from retirement accounts within 30 days of an automatic payroll deduction or
o shares redeemed or exchanged by any "fund of funds" that is affiliated with a Fund.
With respect to shares redeemed or exchanged following the death or disability of a shareholder, mandatory retirement plan distributions or redemption within 30 days of an automatic payroll deduction, you must inform Customer Service or your intermediary that the fee does not apply. You may be required to show evidence that you qualify for the exception. Redemption and exchange fees will be assessed unless or until the Funds are notified that an account is exempt.
Only certain intermediaries have agreed to collect the exchange and redemption fees from their customer accounts. In addition, the fees do not apply to certain types of accounts held through intermediaries, including certain:
o broker wrap fee and other fee-based programs;
o omnibus accounts where there is no capability to impose a redemption fee on underlying customers' accounts and
o intermediaries that do not or cannot report sufficient information to impose a redemption fee on their customer accounts.
To the extent that exchange and redemption fees cannot be collected on particular transactions and excessive trading occurs, the remaining Fund shareholders bear the expense of such frequent trading.
The following Gartmore Funds may assess the fee listed below on the total value of shares that are redeemed or exchanged out of one of these funds into another Gartmore Fund if you have held the shares of the fund for less than the minimum holding period listed below:
MINIMUM
EXCHANGE/ HOLDING PERIOD
FUND REDEMPTION FEE (CALENDAR DAYS)
---------------------------------------------------------------------------------
Gartmore China Opportunities Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Emerging Markets Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Global Financial Services Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Global Health Sciences Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Global Natural Resources Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Global Technology
and Communications Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Global Utilities Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore International Growth Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Market Neutral Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Micro Cap Equity Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Mid Cap Growth Leaders Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Small Cap Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Small Cap Core Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Small Cap Growth
Opportunities Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Small Cap Leaders Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Small Cap Value Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders
Long-Short Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Value Opportunities Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Worldwide Leaders Fund 2.00% 90
---------------------------------------------------------------------------------
NorthPointe Small Cap Growth Fund 2.00% 90
---------------------------------------------------------------------------------
Gartmore Growth Fund 2.00% 30
---------------------------------------------------------------------------------
Gartmore Large Cap Value Fund 2.00% 30
---------------------------------------------------------------------------------
Gartmore Nationwide Fund 2.00% 30
---------------------------------------------------------------------------------
Gartmore Nationwide Leaders Fund 2.00% 30
---------------------------------------------------------------------------------
Gartmore U.S. Growth Leaders Fund 2.00% 30
---------------------------------------------------------------------------------
Gartmore Bond Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore Bond Index Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore Government Bond Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore International Index Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore Mid Cap Market Index Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore S&P 500 Index Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore Short Duration Bond Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore Small Cap Index Fund 2.00% 7
---------------------------------------------------------------------------------
Gartmore Tax-Free Income Fund 2.00% 7
---------------------------------------------------------------------------------
|
GARTMORE NORTHPOINTE FUNDS | 25
SECTION 5 DISTRIBUTIONS AND TAXES
The following information is provided to help you understand the income and capital gains you may earn while you own Fund shares, as well as certain federal income tax consequences of owning Fund shares. Each Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. As such, a Fund generally pays no federal income tax on the income and gains it distributes to you. The amount of any distribution will vary, and there is no guarantee the Fund will pay either an income dividend or a capital gain distribution. For tax advice about your personal tax situation, please speak with your tax adviser.
INCOME AND CAPITAL GAINS DISTRIBUTIONS
Each Fund expects to declare and distribute its net investment income, if any, to shareholders as dividends quarterly. Capital gains, if any, may be distributed at least annually. All income and capital gains distributions are automatically reinvested in shares of the applicable Fund. You may request a payment in cash in writing if the distribution is in excess of $5.
If you choose to have dividends or capital gains distributions, or both, mailed to you and the distribution check is returned as undeliverable or is not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and future distributions in the shares of the particular Fund at the Fund's then-current NAV until you give the Trust different instructions.
If you are a taxable investor, dividends and capital gains distributions you receive from a Fund, whether you reinvest your distributions in additional Fund shares or receive them in cash, are subject to federal income tax, state taxes or local taxes:
o distributions are taxable to you at either ordinary income or capital gains tax rates;
o distributions of short-term capital gains are federally taxable at applicable ordinary income tax rates;
o distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Fund shares;
o for individuals, a portion of the income dividends paid may be qualified dividend income eligible for long-term capital gains tax rates, provided that certain holding period requirements are met;
o for corporate shareholders, a portion of income dividends paid may be eligible for the corporate dividend-received deduction, subject to certain limitations and
o distributions declared in December to shareholders of record in such month, but paid in January, are taxable as if they were paid in December.
The amount and type of income dividends and the tax status of any capital gains distributed to you are reported on Form 1099-DIV, which we send to you annually during tax season (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax). Mutual funds may reclassify income after your tax reporting statement is mailed to you. This can result from the rules in the Internal Revenue Code that effectively prevent mutual funds, such as the Funds, from ascertaining with certainty, until after the calendar year end, and in some cases a Fund's fiscal year end, the final amount and character of distributions the Fund has received on its investments during the prior calendar year. Prior to issuing your statement, each Fund makes every effort to search for reclassified income to reduce the number of corrected forms mailed to shareholders. However, when necessary, the Fund will send you a corrected Form 1099 to reflect reclassified information.
Distributions from the Funds (both taxable dividends and capital gains) are normally taxable to you when made, regardless of whether you reinvest these distributions or receive them in cash (unless you hold your shares in a qualified tax-deferred plan or account or are otherwise not subject to federal income tax).
If you invest in a Fund shortly before it makes a capital gain distribution, some of your investment may be returned to you in the form of a taxable distribution. This is commonly known as "buying a dividend."
SELLING AND EXCHANGING SHARES
Selling your shares may result in a realized capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange from one Gartmore Fund to another is the same as a sale. For individuals, any long-term capital gains you realize from selling Fund shares are taxed at a maximum rate of 15% (or 5% for individuals in the 10% and 15% federal income tax rate brackets). Short-term capital gains are taxed at ordinary income tax rates. You or your tax adviser should track your purchases, tax basis, sales and any resulting gain or loss. If you redeem Fund shares for a loss, you may be able to use this capital loss to offset any other capital gains you have.
OTHER TAX JURISDICTIONS
Distributions may be subject to state and local taxes, even if not subject to federal income taxes. State and local tax laws vary; please consult your tax adviser. Non-U.S. investors may be subject to U.S. withholding or estate tax, and are subject to special U.S. tax certification requirements.
26 | GARTMORE NORTHPOINTE FUNDS
SECTION 5 DISTRIBUTIONS AND TAXES (CONT.)
TAX STATUS FOR RETIREMENT PLANS AND OTHER TAX-DEFERRED ACCOUNTS
When you invest in a Fund through a qualified employee benefit plan, retirement plan or some other tax-deferred account, income dividends and capital gains distributions generally are not subject to current federal income taxes. In general, these plans or accounts are governed by complex tax rules. You should ask your tax adviser or plan administrator for more information about your tax situation, including possible state or local taxes.
BACKUP WITHHOLDING
By law, you may be subject to backup withholding on a portion of your taxable distributions and redemption proceeds unless you provide your correct Social Security or taxpayer identification number and certify that (1) this number is correct, (2) you are not subject to backup withholding, and (3) you are a U.S. person (including a U.S. resident alien). You may also be subject to withholding if the Internal Revenue Service instructs us to withhold a portion of your distributions and proceeds. When withholding is required, the amount is 28% of any distributions or proceeds paid.
THIS DISCUSSION OF "DISTRIBUTIONS AND TAXES" IS NOT INTENDED OR WRITTEN TO BE USED AS TAX ADVICE. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, YOU SHOULD CONSULT YOUR TAX PROFESSIONAL ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES BEFORE MAKING AN INVESTMENT IN THE FUNDS.
GARTMORE NORTHPOINTE FUNDS | 27
SECTION 6 NORTHPOINTE SMALL CAP GROWTH FUND FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the Funds' financial performance for the past five years ended October 31, or if a Fund or a class has not been in existence for five years, for the life of that Fund or class. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions and no sales charges). Information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds' financial statements, are included in the Trust's annual reports, which are available upon request.
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
-----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-----------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
-----------------------------------------------------------------------------------------------
CLASS A SHARES
-----------------------------------------------------------------------------------------------
Period Ended October 31, 2004 (d) $10.00 (0.01) 0.48 0.47
Year Ended October 31, 2005 $10.47 (0.13) 1.33 1.20
Year Ended October 31, 2006 $11.67 (0.09) 2.39 2.30
-----------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $10.00 (0.01) 0.47 0.46
Year Ended October 31, 2005 $10.46 (0.20) 1.32 1.12
Year Ended October 31, 2006 $11.58 (0.21) 2.41 2.20
-----------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $10.00 (0.01) 0.47 0.46
Year Ended October 31, 2005 $10.46 (0.20) 1.32 1.12
Year Ended October 31, 2006 $11.58 (0.21) 2.41 2.20
-----------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $10.00 (0.01) 0.47 0.46
Year Ended October 31, 2005 $10.46 (0.16) 1.33 1.17
Year Ended October 31, 2006 $11.63 (0.14) 2.43 2.29
-----------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $10.00 (0.01) 0.48 0.47
Year Ended October 31, 2005 $10.47 (0.10) 1.33 1.23
Year Ended October 31, 2006 $11.70 (0.10) 2.45 2.35
-----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) (g) $10.00 (0.01) 0.48 0.47
Year Ended October 31, 2005 $10.47 (0.12) 1.36 1.24
Year Ended October 31, 2006 $11.71 (0.07) 2.43 2.36
-----------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------
NET NET ASSET
REALIZED TOTAL VALUE, END TOTAL
GAINS DISTRIBUTIONS OF PERIOD RETURN (a)
--------------------------------------------------------------------------------------------------
CLASS A SHARES
--------------------------------------------------------------------------------------------------
Period Ended October 31, 2004 (d) - - $10.47 4.70%(e)
Year Ended October 31, 2005 - - $11.67 11.46%
Year Ended October 31, 2006 (1.01) (1.01) $12.96 20.98%
--------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) - - $10.46 4.60%(e)
Year Ended October 31, 2005 - - $11.58 10.71%
Year Ended October 31, 2006 (1.01) (1.01) $12.77 20.22%
--------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) - - $10.46 4.60%(e)
Year Ended October 31, 2005 - - $11.58 10.71%
Year Ended October 31, 2006 (1.01) (1.01) $12.77 20.22%
--------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) - - $10.46 4.60%(e)
Year Ended October 31, 2005 - - $11.63 11.19%
Year Ended October 31, 2006 (1.01) (1.01) $12.91 20.96%
--------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) - - $10.47 4.70%(e)
Year Ended October 31, 2005 - - $11.70 11.75%
Year Ended October 31, 2006 (1.01) (1.01) $13.04 21.38%
--------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) - - $10.47 4.70%(e)
Year Ended October 31, 2005 - - $11.71 11.84%
Year Ended October 31, 2006 (1.01) (1.01) $13.06 21.45%
--------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME (LOSS)
RATIO OF NET (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INVESTMENT REIMBURSE- REIMBURSE-
AT END OF EXPENSES INCOME (LOSS) MENTS) TO MENTS) TO
PERIOD TO AVERAGE TO AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (b) ASSETS (b) TURNOVER (c)
------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period Ended October 31, 2004 (d) $ 1 1.50%(f) (1.17%)(f) 9.82%(f) (9.48%)(f) 0.48%
Year Ended October 31, 2005 $ 1 1.58% (1.11%) 1.69% (1.22%) 144.08%
Year Ended October 31, 2006 $ 19 1.40% (0.97%) 1.45% (1.02%) 98.72%
------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period Ended October 31, 2004 (d) $ 1 2.07%(f) (1.78%)(f) 9.13%(f) (8.84%)(f) 0.48%
Year Ended October 31, 2005 $ 1 2.02% (1.79%) 2.10% (1.87%) 144.08%
Year Ended October 31, 2006 $ 1 2.10% (1.73%) 2.22% (1.85%) 98.72%
------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period Ended October 31, 2004 (d) $ 1 2.07%(f) (1.78%)(f) 9.13%(f) (8.84%)(f) 0.48%
Year Ended October 31, 2005 $ 1 2.02% (1.79%) 2.11% (1.87%) 144.08%
Year Ended October 31, 2006 $ 1 2.10% (1.73%) 2.14% (1.77%) 98.72%
------------------------------------------------------------------------------------------------------------------------------
CLASS R SHARES
Period Ended October 31, 2004 (d) $ 1 1.73%(f) (1.17%)(f) 8.65%(f) (6.92%)(f) 0.48%
Year Ended October 31, 2005 $ 1 1.55% (1.41%) 1.56% (1.43%) 144.08%
Year Ended October 31, 2006 $ 1 1.23% (1.10%) 1.23% (1.10%) 98.72%
------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE CLASS SHARES
Period Ended October 31, 2004 (d) $ 1 1.04%(f) (0.74%)(f) 8.22%(f) (7.92%)(f) 0.48%
Year Ended October 31, 2005 $ 1 1.19% (0.87%) 1.40% (1.08%) 144.08%
Year Ended October 31, 2006 $ 1 1.35% (0.77%) 1.35% (0.77%) 98.72%
------------------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Period Ended October 31, 2004 (d) $49,793 1.07%(f) (1.02%)(f) 2.18%(f) (2.14%)(f) 0.48%
Year Ended October 31, 2005 $41,074 1.10% (0.81%) 1.19% (0.89%) 144.08%
Year Ended October 31, 2006 $64,383 1.10% (0.69%) 1.16% (0.74%) 98.72%
------------------------------------------------------------------------------------------------------------------------------
|
(a) Excludes sales charges.
(b) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing among the classes of shares.
(d) For the period from September 29, 2004 (commencement of operations) through October 31, 2004.
(e) Not annualized.
(f) Annualized.
(g) Net investment income (loss) is based on average shares outstanding during the period.
28 | GARTMORE NORTHPOINTE FUNDS
SECTION 6 NORTHPOINTE SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL OUTSTANDING
--------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
-----------------------------------------
NET
REALIZED
AND
NET ASSET NET UNREALIZED
VALUE, INVESTMENT GAINS TOTAL FROM
BEGINNING INCOME (LOSSES) ON INVESTMENT
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES
--------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $11.14 0.06 (0.69) (0.63)
Year Ended October 31, 2003 $ 9.82 0.03 3.72 3.75
Year Ended October 31, 2004 $13.53 0.03 1.64 1.67
Year Ended October 31, 2005 $14.43 0.08 1.99 2.07
Year Ended October 31, 2006 $12.51 0.05 1.86 1.91
--------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
DISTRIBUTIONS
---------------------------------------------------------------
NET NET NET ASSET
INVESTMENT REALIZED TOTAL VALUE, END TOTAL
INCOME GAINS DISTRIBUTIONS OF PERIOD RETURN
-----------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 (0.06) (0.63) (0.69) $ 9.82 (6.43%)
Year Ended October 31, 2003 (0.04) - (0.04) $13.53 38.25%
Year Ended October 31, 2004 (0.03) (0.74) (0.77) $14.43 12.65%
Year Ended October 31, 2005 (0.08) (3.91) (3.99) $12.51 15.39%
Year Ended October 31, 2006 (0.05) (2.65) (2.70) $11.72 18.07%
-----------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------
RATIO OF NET
RATIO RATIO OF INVESTMENT
OF NET EXPENSES INCOME
INVESTMENT (PRIOR TO (PRIOR TO
NET ASSETS RATIO OF INCOME REIMBURSE- REIMBURSE-
AT END OF EXPENSES (LOSS) TO MENTS) TO MENTS) TO
PERIOD TO AVERAGE AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
(000S) NET ASSETS NET ASSETS ASSETS (a) ASSETS (a) TURNOVER
---------------------------------------------------------------------------------------------------------------
INSTITUTIONAL CLASS SHARES
Year Ended October 31, 2002 $29,961 1.00% 0.52% 1.06% 0.46% 105.59%
Year Ended October 31, 2003 $39,328 1.00% 0.25% 1.01% 0.23% 102.63%
Year Ended October 31, 2004 $32,156 0.99% 0.19% 1.00% 0.18% 135.45%
Year Ended October 31, 2005 $25,069 1.00% 0.61% 1.03% 0.59% 164.93%
Year Ended October 31, 2006 $32,267 1.00% 0.43% 1.07% 0.36% 154.88%
---------------------------------------------------------------------------------------------------------------
|
(a) During the period certain fees were waived and/or reimbursed. If such waivers/reimbursements had not occurred, the ratios would have been as indicated.
GARTMORE NORTHPOINTE FUNDS | 29
INFORMATION FROM GARTMORE FUNDS
Please read this Prospectus before you invest and keep it with your records. The following documents--which may be obtained free of charge--contain additional information about the Funds:
o Statement of Additional Information (incorporated by reference into this Prospectus)
o Annual Reports (which contain discussions of the market conditions and investment strategies that significantly affected each Fund's performance)
o Semiannual Reports
To obtain any of the above documents free of charge, to request other information about a Fund or to make other shareholder inquiries, contact us at the address or number listed below.
To reduce the volume of mail you receive, only one copy of financial reports, prospectuses, other regulatory materials and other communications will be mailed to your household (if you share the same last name and address). You can call us at 800-848-0920 or write to us at the address listed below, to request (1) additional copies free of charge or (2) that we discontinue our practice of mailing regulatory materials together.
If you wish to receive regulatory materials and/or account statements electronically, you can sign-up for our free e-delivery service. Please call 800-848-0920 for information.
FOR ADDITIONAL INFORMATION CONTACT:
BY REGULAR MAIL:
Gartmore Funds
P.O. Box 182205
Columbus, Ohio 43218-2205
614-428-3278 (fax)
BY OVERNIGHT MAIL:
Gartmore Funds
3435 Stelzer Road
Columbus, Ohio 43219
FOR 24-HOUR ACCESS:
800-848-0920 (toll free) Customer Service Representatives are available 8 a.m. - 9 p.m. Eastern Time, Monday through Friday. Call after 7 p.m. Eastern Time for closing share prices. Also, visit the Gartmore Funds' website at www.nwdfunds.com.
INFORMATION FROM THE SECURITIES AND EXCHANGE COMMISSION (SEC)
You can obtain copies of Fund documents from the SEC
o on the SEC's EDGAR database via the Internet at www.sec.gov,
o by electronic request to publicinfo@sec.gov.
o in person at the SEC's Public Reference Room in Washington, D.C. (For their hours of operation, call 202-551-8090.) or
o by mail by sending your request to Securities and Exchange Commission Public Reference Section, Washington, D.C. 20549-0102 (The SEC charges a fee to copy any documents.)
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
(C) 2007 NWD Investment Management, Inc. All rights reserved.
PR-NP 2/07
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 2007
GARTMORE MUTUAL FUNDS
GARTMORE BOND FUND GARTMORE INVESTOR DESTINATIONS GARTMORE OPTIMAL ALLOCATIONS FUND:
GARTMORE BOND INDEX FUND MODERATELY AGGRESSIVE FUND MODERATE
GARTMORE CHINA OPPORTUNITIES FUND GARTMORE INVESTOR DESTINATIONS GARTMORE OPTIMAL ALLOCATIONS FUND:
GARTMORE EMERGING MARKETS FUND MODERATE FUND DEFENSIVE
GARTMORE ENHANCED INCOME FUND GARTMORE INVESTOR DESTINATIONS GARTMORE OPTIMAL ALLOCATIONS FUND:
GARTMORE GLOBAL FINANCIAL SERVICES FUND MODERATELY CONSERVATIVE FUND SPECIALTY
GARTMORE GLOBAL HEALTH SCIENCES FUND GARTMORE INVESTOR DESTINATIONS GARTMORE S&P 500 INDEX FUND
GARTMORE GLOBAL NATURAL RESOURCES FUND CONSERVATIVE FUND GARTMORE SHORT DURATION BOND FUND
GARTMORE GLOBAL TECHNOLOGY AND GARTMORE LARGE CAP VALUE FUND GARTMORE SMALL CAP FUND
COMMUNICATIONS FUND GARTMORE MICRO CAP EQUITY FUND GARTMORE SMALL CAP INDEX FUND
GARTMORE GLOBAL UTILITIES FUND GARTMORE MID CAP GROWTH FUND GARTMORE SMALL CAP LEADERS FUND
GARTMORE GOVERNMENT BOND FUND GARTMORE MID CAP GROWTH LEADERS FUND GARTMORE TAX-FREE INCOME FUND
GARTMORE GROWTH FUND GARTMORE MID CAP MARKET INDEX FUND GARTMORE U.S. GROWTH LEADERS FUND
GARTMORE INTERNATIONAL GROWTH FUND GARTMORE MONEY MARKET FUND GARTMORE U.S. GROWTH LEADERS
GARTMORE INTERNATIONAL INDEX FUND GARTMORE NATIONWIDE FUND LONG-SHORT FUND
GARTMORE INVESTOR DESTINATIONS GARTMORE NATIONWIDE LEADERS FUND GARTMORE VALUE OPPORTUNITIES FUND
AGGRESSIVE FUND GARTMORE OPTIMAL ALLOCATIONS FUND: GARTMORE WORLDWIDE LEADERS FUND
GROWTH NORTHPOINTE SMALL CAP GROWTH FUND
GARTMORE OPTIMAL ALLOCATIONS FUND: NORTHPOINTE SMALL CAP VALUE FUND
MODERATE GROWTH
|
Gartmore Mutual Funds (the "Trust") is a registered open-end investment company consisting of 49 series as of the date hereof. This Statement of Additional Information ("SAI") relates to all series of the Trust which are listed above (each, a "Fund" and collectively, the "Funds").
This SAI is not a prospectus but is incorporated by reference into the Prospectuses for the Funds. It contains information in addition to and more detailed than that set forth in the Prospectuses and should be read in conjunction with the following Prospectuses:
o Gartmore Global Financial Services Fund, Gartmore Global Health Sciences Fund, Gartmore Global Natural Resources Fund, Gartmore Global Technology and Communications Fund and Gartmore Global Utilities Fund dated February 28, 2007;
o Gartmore Bond Index Fund, Gartmore International Index Fund, Gartmore Mid Cap Market Index Fund, Gartmore S&P 500 Index Fund and Gartmore Small Cap Index Fund dated February 28, 2007;
o NorthPointe Small Cap Growth Fund and NorthPointe Small Cap Value Fund dated February 28, 2007;
o Gartmore Micro Cap Equity Fund dated February 28, 2007;
o Gartmore Growth Fund, Gartmore Large Cap Value Fund, Gartmore Mid Cap Growth Fund, Gartmore Nationwide Fund and Gartmore Value Opportunities Fund dated February 28, 2007;
o Gartmore Mid Cap Growth Leaders Fund, Gartmore Nationwide Leaders Fund, Gartmore Small Cap Leaders Fund, Gartmore U.S. Growth Leaders Fund and Gartmore Worldwide Leaders Fund dated February 28, 2007;
o Gartmore Bond Fund, Gartmore Government Bond Fund and Gartmore Tax-Free Income Fund (Class X and Class Y shares) dated February 28, 2007;
o Gartmore Bond Fund, Gartmore Government Bond Fund, Gartmore Money Market Fund, Gartmore Enhanced Income Fund, Gartmore Short Duration Bond Fund and Gartmore Tax-Free Income Fund dated February 28, 2007;
o Gartmore China Opportunities Fund, Gartmore Emerging Markets Fund and Gartmore International Growth Fund dated February 28, 2007;
o Gartmore U.S. Growth Leaders Long-Short Fund dated February 28, 2007;
o Gartmore Small Cap Fund dated February 28, 2007;
o Gartmore Optimal Allocations Fund: Moderate, Gartmore Optimal Allocations Fund: Moderate Growth, Gartmore Optimal Allocations Fund: Growth, Gartmore Optimal Allocations Fund: Specialty, and Gartmore Optimal Allocations Fund: Defensive dated February 28, 2007;
o Gartmore Investor Destinations Aggressive Fund, Gartmore Investor Destinations Moderately Aggressive Fund, Gartmore Investor Destinations Moderate Fund, Gartmore Investor Destinations Moderately Conservative Fund and Gartmore Investor Destinations Conservative Fund dated February 28, 2007.
Terms not defined in this SAI have the meanings assigned to them in the Prospectuses. The Prospectuses may be obtained from Gartmore Mutual Funds, P.O. Box 182205, Columbus, Ohio 43218-2205, or by calling toll free 800-848-6311.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management Limited (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
TABLE OF CONTENTS
PAGE
----
General Information and History ............................................................................. 1
Additional Information on Portfolio Instruments and Investment Policies ..................................... 2
Description of Portfolio Instruments and Investment Policies ................................................ 11
Investment Restrictions ..................................................................................... 61
Disclosure of Portfolio Holdings ............................................................................ 65
Trustees and Officers of the Trust .......................................................................... 67
Investment Advisory and Other Services ...................................................................... 75
Brokerage Allocation ........................................................................................ 118
Additional Information on Purchases and Sales ............................................................... 125
Valuation of Shares ......................................................................................... 136
Systematic Investment Strategies ............................................................................ 138
Investor Privileges ......................................................................................... 140
Investor Services ........................................................................................... 143
Fund Performance Advertising ................................................................................ 144
Additional Information ...................................................................................... 148
Additional General Tax Information for All Funds ............................................................ 151
Major Shareholders .......................................................................................... 161
Financial Statements ........................................................................................ 251
Appendix A - Debt Ratings ................................................................................... 252
Appendix B - Proxy Voting Guidelines Summaries .............................................................. 260
Appendix C - Portfolio Managers ............................................................................. 275
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GENERAL INFORMATION AND HISTORY
Gartmore Mutual Funds (the "Trust"), formerly Nationwide Mutual Funds (until January 25, 2002) and Nationwide Investing Foundation III (until March 1, 2000), is an open-end management investment company formed under the laws of the state of Delaware by a Declaration of Trust dated February 28, 2005. The Trust, originally organized as an Ohio business trust under the laws of the state of Ohio by a Declaration of Trust dated October 30, 1997, redomesticated as a Delaware statutory trust on or about February 28, 2005 in a reorganization approved by vote of the shareholders of the Ohio business trust in a shareholders' meeting on December 23, 2004. In the reorganization the Ohio business trust transferred all of its assets to the Trust in exchange for shares of the Trust and assumption by the Trust of all of the liabilities of the Ohio business trust.
The Trust currently consists of 49 separate series, each with its own investment objective. Each of the Funds, except the Gartmore Nationwide Leaders, Gartmore U.S. Growth Leaders, Gartmore Worldwide Leaders, Gartmore Global Health Sciences, Gartmore Global Financial Services, Gartmore Global Natural Resources, Gartmore Global Utilities, Gartmore Global Technology and Communications, each of the Investor Destinations and each of the Optimal Allocations Funds, is a diversified fund as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
On August 27, 2001, the Nationwide Long-Term U.S. Government Bond Fund reorganized with and into the Gartmore Government Bond Fund, which is the survivor of the transaction for accounting and performance purposes.
On June 23, 2003, the Montgomery Global Focus Fund and the Montgomery Global Opportunities Fund, two series portfolios of The Montgomery Funds, reorganized with and into the Gartmore Worldwide Leaders Fund. Also on June 23, 2003, the Montgomery Partners Long-Short Equity Plus Fund, a series portfolio of The Montgomery Funds II ("Montgomery Fund"), reorganized with and into the Gartmore Long-Short Equity Plus Fund (now known as the Gartmore U.S. Growth Leaders Long-Short Fund). For accounting and performance purposes, the Montgomery Fund was considered to be the survivor of its reorganization.
On December 22, 2003, the Nationwide Large Cap Growth Fund reorganized with and into the Gartmore Growth Fund, which is the survivor of the transaction for accounting and performance purposes.
On December 6, 2004, Gartmore Morley Capital Accumulation Fund changed its name to Gartmore Short Duration Bond Fund and changed its investment emphasis from stable value securities to short duration securities.
Effective February 28, 2007, the Gartmore Optimal Allocations Fund:
Aggressive and Gartmore Optimal Allocations Fund: Moderatly Aggessive changed
their names to Gartmore Optimal Allocations Fund: Growth and Gartmore Optimal
Allocations Fund: Moderate Growth, respectively.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
ALL FUNDS
The Funds invest in a variety of securities and employ a number of investment techniques that involve certain risks. The Prospectuses for the Funds highlight the principal investment strategies, investment techniques and risks. This SAI contains additional information regarding both the principal and non-principal investment strategies of the Funds. The following table sets forth additional information concerning permissible investments and techniques for each of the Funds. A "Y" in the table indicates that the Fund may invest in or follow the corresponding instrument or technique. An empty box indicates that the Fund does not intend to invest in or follow the corresponding instrument or technique.
With respect to the Investor Destinations Funds and the Optimal Allocations Funds (together, the "Funds of Funds" and individually, a "Fund of Funds"), this SAI, like the Prospectuses for such Funds, uses the term "Fund" to include the mutual funds in which each Fund of Funds will invest (the "Underlying Funds").
Please review the discussions in the Prospectuses for further information regarding the investment objectives and policies of each Fund.
--------------------------------------------------------------------------------------------------------------------------------
GARTMORE GARTMORE GARTMORE GARTMORE
GARTMORE GARTMORE GARTMORE TAX FREE GOVERNMENT MONEY S&P 500
TYPE OF INVESTMENT OR TECHNIQUE GROWTH NATIONWIDE BOND INCOME BOND MARKET INDEX
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
U.S. common stocks Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Preferred stocks Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Small company stocks Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Special situation companies Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Illiquid securities Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Restricted securities Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
When-issued / delayed-delivery Y Y Y Y Y Y Y
securities
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Investment companies Y Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Real estate investment trusts (REITS) Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Securities of foreign issuers Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Depositary receipts Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Securities from developing
countries/emerging markets
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Convertible securities Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Long-term debt Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Long-term debt when originally issued Y Y Y Y Y Y Y
but with 397 days or less remaining
to maturity
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Short-term debt Y Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Floating and variable rate securities Y Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Zero coupon securities Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Pay-in-kind bonds Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Deferred payment securities Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Non-investment grade debt Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Loan participations and assignments Y Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Sovereign debt (foreign) Y Y
(denominated in U.S. $)
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Foreign commercial paper Y Y Y
(denominated in U.S. $)
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Duration Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
U.S. government securities Y Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
Money market instruments Y Y Y Y Y Y Y
-------------------------------------- ------- ---------- -------- -------- ---------- -------- ---------
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GARTMORE GARTMORE
GARTMORE GLOBAL GARTMORE MID CAP GARTMORE
VALUE HEALTH SMALL CAP MARKET INTERNATIONAL GARTMORE
TYPE OF INVESTMENT OR TECHNIQUE OPPORTUNITIES SCIENCES INDEX INDEX INDEX BOND INDEX
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
U.S. common stocks Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Preferred stocks Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Small company stocks Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Special situation companies Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Illiquid securities Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Restricted securities Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
When-issued / delayed-delivery Y Y Y Y Y Y
securities
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Investment companies Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Real estate investment trusts (REITS) Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Securities of foreign issuers Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Depositary receipts Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Securities from developing Y Y
countries/emerging markets
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Convertible securities Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Long-term debt Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Long-term debt when originally issued Y Y Y Y Y Y
but with 397 days or less remaining
to maturity
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Short-term debt Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Floating and variable rate securities Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Zero coupon securities Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Pay-in-kind bonds
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Deferred payment securities
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Non-investment grade debt
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Loan participations and assignments Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Sovereign debt (foreign) Y
(denominated in U.S. $)
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Foreign commercial paper Y Y Y
(denominated in U.S. $)
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Duration Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
U.S. government securities Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
Money market instruments Y Y Y Y Y Y
-------------------------------------- ------------- ------- --------- --------- ------------- -----------
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GARTMORE
GARTMORE GARTMORE INVESTOR
GARTMORE SHORT GARTMORE NORTHPOINT INVESTOR DESTINATIONS
LARGE CAP GARTMORE DURATION ENHANCED SMALL CAP DESTINATIONS MODERATE
TYPE OF INVESTMENT OR TECHNIQUE VALUE SMALL CAP BOND INCOME VALUE GROWTH GROWTH
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
U.S. common stocks Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Preferred stocks Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Small company stocks Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Special situation companies Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Illiquid securities Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Restricted securities Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
When-issued/delayed-delivery securities Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Investment companies Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Real estate investment trusts (REITS) Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Securities of foreign issuers Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Depositary receipts Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Securities from developing Y Y
countries/emerging markets
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Convertible securities Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Long-term debt Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Long-term debt when originally issued Y Y Y Y Y Y
but with 397 days or less remaining to
maturity
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Short-term debt Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Floating and variable rate securities Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Zero coupon securities Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Pay-in-kind bonds
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Deferred payment securities Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Non-investment grade debt
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Loan participations and assignments Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Sovereign debt (foreign) (denominated Y Y Y Y Y Y
in U.S. $)
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Foreign commercial paper) (denominated Y Y Y Y
in U.S. $)
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Duration Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
U.S. government securities Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
Money market instruments Y Y Y Y Y Y Y
----------------------------------------- --------- --------- -------- -------- ---------- ------------ ------------
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GARTMORE GARTMORE
GARTMORE INVESTOR GARTMORE GARTMORE GLOBAL
INVESTOR DESTINATIONS INVESTOR MID CAP TECHNOLOGY GARTMORE GARTMORE
DESTINATIONS MODERATELY DESTINATIONS GROWTH AND EMERGING INTERNATIONAL
TYPE OF INVESTMENT OR TECHNIQUE MODERATE CONSERVATIVE CONSERVATIVE LEADERS COMMUMICATIONS MARKETS GROWTH
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
U.S. common stocks Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Preferred stocks Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Small company stocks Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Special situation companies Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Illiquid securities Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Restricted securities Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
When-issued/delayed-delivery securities Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Investment companies Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Real estate investment trusts (REITS) Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Securities of foreign issuers Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Depositary receipts Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Securities from developing Y Y Y Y
countries/emerging markets
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Convertible securities Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Long-term debt Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Long-term debt when originally issued Y Y Y Y Y
but with 397 days or less remaining to
maturity
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Short-term debt Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Floating and variable rate securities Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Zero coupon securities Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Pay-in-kind bonds Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Deferred payment securities Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Non-investment grade debt Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Loan participations and assignments Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Sovereign debt (foreign) (denominated Y Y Y Y Y Y
in U.S. $)
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Foreign commercial paper) (denominated Y Y Y Y Y
in U.S. $)
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Duration Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
U.S. government securities Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
Money market instruments Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- --------- ------------
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GARTMORE
GARTMORE GARTMORE GLOBAL GARTMORE GARTMORE
WORLDWIDE U.S. GROWTH FINANCIAL GLOBAL NATIONWIDE
TYPE OF INVESTMENT OR TECHNIQUE LEADERS LEADERS SERVICES UTILITIES LEADERS
---------------------------------------------- --------- ----------- --------- --------- ----------
U.S. common stocks Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Preferred stocks Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Small company stocks Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Special situation companies Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Illiquid securities Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Restricted securities Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
When-issued / delayed-delivery securities Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Investment companies Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Real estate investment trusts (REITS) Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Securities of foreign issuers Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Depositary receipts Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Securities from developing countries/ Y Y Y Y
emerging markets
---------------------------------------------- --------- ----------- --------- --------- ----------
Convertible securities Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Long-term debt Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Long-term debt when originally issued, but Y Y Y Y
with 397 days or less remaining to maturity
---------------------------------------------- --------- ----------- --------- --------- ----------
Short-term debt Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Floating and variable rate securities Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Zero coupon securities Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Pay-in-kind bonds
---------------------------------------------- --------- ----------- --------- --------- ----------
Deferred payment securities Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Non-investment grade debt Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Loan participations and assignments Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Sovereign debt(foreign)(denominated Y
in U.S.$)
---------------------------------------------- --------- ----------- --------- --------- ----------
Foreign commercial paper (denominated in Y Y
U.S. $)
---------------------------------------------- --------- ----------- --------- --------- ----------
Duration Y
---------------------------------------------- --------- ----------- --------- --------- ----------
U.S. government securities Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
Money market instruments Y Y Y Y Y
---------------------------------------------- --------- ----------- --------- --------- ----------
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GARTMORE
GARTMORE GARTMORE U.S. GROWTH NORTHPOINTE
MICRO CAP MID CAP LEADERS SMALL CAP
TYPE OF INVESTMENT OR TECHNIQUE EQUITY GROWTH LONG-SHORT GROWTH
---------------------------------------------- -------- -------- ----------- ------------
U.S. common stocks Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Preferred stocks Y Y
---------------------------------------------- -------- -------- ----------- ------------
Small company stocks Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Special situation companies Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Illiquid securities Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Restricted securities Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
When-issued / delayed-delivery securities Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Investment companies Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Real estate investment trusts (REITS) Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Securities of foreign issuers Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Depositary receipts Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Securities from developing countries/
emerging markets
---------------------------------------------- -------- -------- ----------- ------------
Convertible securities Y Y
---------------------------------------------- -------- -------- ----------- ------------
Long-term debt
---------------------------------------------- -------- -------- ----------- ------------
Long-term debt when originally issued, but Y
with 397 days or less remaining to maturity
---------------------------------------------- -------- -------- ----------- ------------
Short-term debt Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Floating and variable rate securities Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Zero coupon securities
---------------------------------------------- -------- -------- ----------- ------------
Pay-in-kind bonds
---------------------------------------------- -------- -------- ----------- ------------
Deferred payment securities
---------------------------------------------- -------- -------- ----------- ------------
Non-investment grade debt
---------------------------------------------- -------- -------- ----------- ------------
Loan participations and assignments Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Sovereign debt(foreign)(denominated
in U.S.$)
---------------------------------------------- -------- -------- ----------- ------------
Foreign commercial paper (denominated in Y
U.S. $)
---------------------------------------------- -------- -------- ----------- ------------
Duration
---------------------------------------------- -------- -------- ----------- ------------
U.S. government securities Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
Money market instruments Y Y Y Y
---------------------------------------------- -------- -------- ----------- ------------
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GARTMORE
GARTMORE OPTIMAL GARTMORE GARTMORE
OPTIONAL ALLOCATIONS: OPTIMAL OPTIMAL
ALLOCATIONS: MODERATE ALLOCATIONS: ALLOCATIONS:
TYPE OF INVESTMENT OR TECHNIQUE GROWTH GROWTH MODERATE SPECIALTY
------------------------------------- ------------ ----------- ------------ ------------
U.S. common stocks Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Preferred stocks
------------------------------------- ------------ ----------- ------------ ------------
Small company stocks
------------------------------------- ------------ ----------- ------------ ------------
Special situation companies Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Illiquid securities Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Restricted securities Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
When-issued / delayed-delivery Y Y Y Y
securities
------------------------------------- ------------ ----------- ------------ ------------
Investment companies Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Real estate investment trusts (REITS) Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Securities of foreign issuers Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Depositary receipts Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Securities from developing Y Y Y Y
countries/emerging markets
------------------------------------- ------------ ----------- ------------ ------------
Convertible securities Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Long-term debt Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Long-term debt when originally issued Y Y Y Y
but with 397 days or less remaining
to maturity
------------------------------------- ------------ ----------- ------------ ------------
Short-term debt Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Floating and variable rate securities Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Zero coupon securities Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Pay-in-kind bonds
------------------------------------- ------------ ----------- ------------ ------------
Deferred payment securities
------------------------------------- ------------ ----------- ------------ ------------
Non-investment grade debt Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Loan participations and assignments Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Sovereign debt (foreign) Y Y Y Y
(denominated in U.S. $)
------------------------------------- ------------ ----------- ------------ ------------
Foreign commercial paper Y Y Y Y
(denominated in U.S. $)
------------------------------------- ------------ ----------- ------------ ------------
Duration Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
U.S. government securities Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
Money market instruments Y Y Y Y
------------------------------------- ------------ ----------- ------------ ------------
|
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GARTMORE GARTMORE
OPTIMAL GARTMORE GLOBAL GARTMORE
ALLOCATIONS: CHINA NATURAL SMALL CAP
TYPE OF INVESTMENT OR TECHNIQUE DEFENSIVE OPPORTUNITIES RESOURCES LEADERS
------------------------------------- ------------ ------------- --------- ---------
U.S. common stocks Y
------------------------------------- ------------ ------------- --------- ---------
Preferred stocks Y
------------------------------------- ------------ ------------- --------- ---------
Small company stocks Y
------------------------------------- ------------ ------------- --------- ---------
Special situation companies Y Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Illiquid securities Y Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Restricted securities Y Y Y
------------------------------------- ------------ ------------- --------- ---------
When-issued / delayed-delivery Y Y Y Y
securities
------------------------------------- ------------ ------------- --------- ---------
Investment companies Y Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Real estate investment trusts (REITS) Y Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Securities of foreign issuers Y Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Depositary receipts Y Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Securities from developing Y Y Y
countries/emerging markets
------------------------------------- ------------ ------------- --------- ---------
Convertible securities Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Long-term debt Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Long-term debt when originally issued Y Y Y
but with 397 days or less remaining
to maturity
------------------------------------- ------------ ------------- --------- ---------
Short-term debt Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Floating and variable rate securities Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Zero coupon securities Y
------------------------------------- ------------ ------------- --------- ---------
Pay-in-kind bonds Y
------------------------------------- ------------ ------------- --------- ---------
Deferred payment securities Y
------------------------------------- ------------ ------------- --------- ---------
Non-investment grade debt Y
------------------------------------- ------------ ------------- --------- ---------
Loan participations and assignments Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Sovereign debt (foreign) Y Y
(denominated in U.S. $)
------------------------------------- ------------ ------------- --------- ---------
Foreign commercial paper Y Y
(denominated in U.S. $)
------------------------------------- ------------ ------------- --------- ---------
Duration Y
------------------------------------- ------------ ------------- --------- ---------
U.S. government securities Y Y Y
------------------------------------- ------------ ------------- --------- ---------
Money market instruments Y Y Y Y
------------------------------------- ------------ ------------- --------- ---------
|
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GARTMORE GARTMORE GARTMORE GARTMORE
GARTMORE GARTMORE GARTMORE TAX FREE GOVERNMENT MONEY S&P 500
TYPE OF INVESTMENT OR TECHNIQUE GROWTH NATIONWIDE BOND INCOME BOND MARKET INDEX
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Mortgage-backed securities Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Stripped mortgage securities Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Collateralized mortgage obligations Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Mortgage dollar rolls
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Asset-backed securities Y Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Bank and/or Savings and Loan obligations Y Y Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Repurchase agreements Y Y Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Derivatives Y Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Reverse repurchase agreements Y Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Warrants Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Futures Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Options Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Foreign currencies
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Forward currency contracts Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Borrowing money Y Y Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Lending portfolio securities Y Y Y Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Investment of securities lending Y Y Y Y Y Y
collateral
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Short sales Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Participation Interests
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Swap Agreements Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Credit Default Swaps Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Wrap Contracts
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Indexed securities Y Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Strip Bonds Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Put Bonds Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Private Activity and Industrial
Development Bonds
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Custodial Receipts
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Nationwide Contract
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Extendable Commercial Notes Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Standby Commitment Agreements
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Municipal Securities Y Y
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Equity Linked Notes
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
Exchange Traded Funds
--------------------------------------- -------- ---------- -------- -------- ---------- --------- ---------
|
------------------------------------------------------------------------------------------------------------------------------
GARTMORE GARTMORE
GARTMORE GLOBAL GARTMORE MID CAP GARTMORE GARTMORE
VALUE HEALTH SMALL CAP MARKET INTERNATIONAL BOND
TYPE OF INVESTMENT OR TECHNIQUE OPPORTUNITIES SCIENCES INDEX INDEX INDEX INDEX
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Mortgage-backed securities Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Stripped mortgage securities Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Collateralized mortgage obligations Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Mortgage dollar rolls Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Asset-backed securities Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Bank and/or Savings and Loan obligations Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Repurchase agreements Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Derivatives Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Reverse repurchase agreements Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Warrants Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Futures Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Options Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Foreign currencies Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Forward currency contracts Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Borrowing money Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Lending portfolio securities Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Investment of securities lending Y Y Y Y Y Y
collateral
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Short sales Y Y Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Participation Interests
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Swap Agreements Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Credit Default Swaps
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Wrap Contracts
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Indexed securities Y Y Y Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Strip Bonds
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Put Bonds
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Private Activity and Industrial
Development Bonds
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Custodial Receipts
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Nationwide Contract
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Extendable Commercial Notes
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Standby Commitment Agreements Y
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Municipal Securities
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Equity Linked Notes
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
Exchange Traded Funds
--------------------------------------- ------------- -------- --------- --------- -------------- ---------
|
------------------------------------------------------------------------------------------------------------------------------------
GARTMORE GARTMORE GARTMORE
GARTMORE SHORT INVESTOR INVESTOR
LARTGE CAP GARTMORE DURATION GARTMORE NORTHPOINTE DESTINATIONS DESTINATIONS
TYPE OF INVESTMENT OR TECHNIQUE VALUE SMALL CAP BOND ENHANCED SMALL CAP GROWTH MODERATE
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Mortgage-backed securities Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Stripped mortgage securities Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Collateralized mortgage obligations Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Mortgage dollar rolls Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Asset-backed securities Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Bank and/or Savings and Loan obligations Y Y Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Repurchase agreements Y Y Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Derivatives Y Y Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Reverse repurchase agreements Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Warrants Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Futures Y Y Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Options Y Y Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Foreign currencies Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Forward currency contracts Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Borrowing money Y Y Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Lending portfolio securities Y Y Y Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Investment of securities lending Y Y Y Y Y
collateral
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Short sales Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Participation Interests
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Swap Agreements Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Credit Default Swaps
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Wrap Contracts
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Indexed securities Y Y Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Strip Bonds
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Put Bonds
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Private Activity and Industrial
Development Bonds
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Custodial Receipts
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Nationwide Contract Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Extendable Commercial Notes Y Y
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Standby Commitment Agreements
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Municipal Securities
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Equity Linked Notes
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
Exchange Traded Funds
--------------------------------------- ---------- --------- -------- -------- ----------- ------------ ------------
|
------------------------------------------------------------------------------------------------------------------------------------
GARTMORE
GARTMORE GARTMORE GARTMORE GLOBAL
INVESTOR INVESTOR INVESTOR GARTMORE TECHNOLOGY GARTMORE GARTMORE
DESTINATIONS DESTINATIONS DESTINATIONS MID CAP AND EMERGING INTERNATIONAL
TYPE OF INVESTMENT OR TECHNIQUE MODERATE MODERATELY CONSERVATIVE GROWTH COMMUNICATIONS MARKETS GROWTH
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Mortgage-backed securities Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Stripped mortgage securities
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Collateralized mortgage obligations Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Mortgage dollar rolls Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Asset-backed securities Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Bank and/or Savings and Loan obligations Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Repurchase agreements Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Derivatives Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Reverse repurchase agreements Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Warrants Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Futures Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Options Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Foreign currencies Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Forward currency contracts Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Borrowing money Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Lending portfolio securities Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Investment of securities lending Y Y Y Y
collateral
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Short sales Y Y Y Y Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Participation Interests
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Swap Agreements Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Credit Default Swaps
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Wrap Contracts
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Indexed securities Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Strip Bonds
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Put Bonds
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Private Activity and Industrial
Development Bonds
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Custodial Receipts
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Nationwide Contract Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Extendable Commercial Notes Y Y Y
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Standby Commitment Agreements
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Municipal Securities
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Equity Linked Notes
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
Exchange Traded Funds
--------------------------------------- ------------ ------------ ------------ -------- -------------- -------- ------------
|
------------------------------------------------------------------------------------------------------------------------------------
GARTMORE
GARTMORE GARTMORE GARTMORE GARTMORE GARTMORE GARTMORE U.S. GROWTH NORTHPOINTE
WORLDWIDE U.S. GROWTH GLOBAL NATIONWID MID CAP MICRO CAP LEADERS SMALL CAP
TYPE OF INVESTMENT OR TECHNIQUE LEADERS LEADERS UTILITIES LEADERS EQUITY GROWTH LONG-SHORT GROWTH
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Mortgage-backed securities Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Stripped mortgage securities
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Collateralized mortgage obligations
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Mortgage dollar rolls
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Asset-backed securities Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Bank and/or Savings and Loan Y Y Y Y Y Y Y Y
obligations
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Repurchase agreements Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Derivatives Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Reverse repurchase agreements Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Warrants Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Futures Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Options Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Foreign currencies Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Forward currency contracts Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Borrowing money Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Lending portfolio securities Y Y Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Short sales Y Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Participation Interests
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Swap Agreements Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Credit Default Swaps
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Wrap Contracts
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Indexed securities Y Y Y Y Y
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Strip Bonds
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Put Bonds
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Private Activity and Industrial
Development Bonds
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Custodial Receipts
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Nationwide Contract
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Extendable Commercial Notes
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Standby Commitment Agreements
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Municipal Securities
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Equity Linked Notes
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
Exchange Traded Funds
------------------------------------ --------- ----------- --------- --------- --------- -------- ------------ -----------
|
----------------------------------------------------------------------------------------------------
GARTMORE
GARTMORE OPTIMAL GARTMORE GARTMORE
OPTIMAL ALLOCATIONS: OPTIMAL GLOBAL
ALLOCATIONS: MODERATE ALLOCATIONS: FINANCIAL
TYPE OF INVESTMENT OR TECHNIQUE GROWTHS GROWTH MODERATE SERVICES
------------------------------------ ----------- ----------- ------------ ------------
Mortgage-backed securities Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Stripped mortgage securities Y Y
------------------------------------ ----------- ----------- ------------ ------------
Collateralized mortgage obligations Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Mortgage dollar rolls Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Asset-backed securities Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Bank and/or Savings and Loan Y Y Y Y
obligations
------------------------------------ ----------- ----------- ------------ ------------
Repurchase agreements Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Derivatives Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Reverse repurchase agreements Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Warrants Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Futures Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Options Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Foreign currencies Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Forward currency contracts Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Borrowing money Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Lending portfolio securities Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Investment of securities lending Y Y Y Y
collateral
------------------------------------ ----------- ----------- ------------ ------------
Short sales Y Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Participation Interests
------------------------------------ ----------- ----------- ------------ ------------
Swap Agreements Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Credit Default Swaps
------------------------------------ ----------- ----------- ------------ ------------
Wrap Contracts
------------------------------------ ----------- ----------- ------------ ------------
Indexed securities Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Strip Bonds
------------------------------------ ----------- ----------- ------------ ------------
Put Bonds
------------------------------------ ----------- ----------- ------------ ------------
Private Activity and Industrial
Development Bonds
------------------------------------ ----------- ----------- ------------ ------------
Custodial Receipts
------------------------------------ ----------- ----------- ------------ ------------
Nationwide Contract
------------------------------------ ----------- ----------- ------------ ------------
Extendable Commercial Notes Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
Standby Commitment Agreements
------------------------------------ ----------- ----------- ------------ ------------
Municipal Securities
------------------------------------ ----------- ----------- ------------ ------------
Equity Linked Notes
------------------------------------ ----------- ----------- ------------ ------------
Exchange Traded Funds Y Y Y
------------------------------------ ----------- ----------- ------------ ------------
|
--------------------------------------------------------------------------------------------------
GARTMORE GARTMORE
OPTIMAL GARTMORE GLOBAL GARTMORE GARTMORE
ALLOCATIONS: CHINA NATURAL SMALL CAP SMALL CAP
TYPE OF INVESTMENT OR TECHNIQUE DEFENSIVE OPPORTUNITIES RESOURCES LEADERS LEADERS
------------------------------------ ----------- ------------- --------- --------- ---------
Mortgage-backed securities Y
------------------------------------ ----------- ------------- --------- --------- ---------
Stripped mortgage securities Y
------------------------------------ ----------- ------------- --------- --------- ---------
Collateralized mortgage obligations Y
------------------------------------ ----------- ------------- --------- --------- ---------
Mortgage dollar rolls Y
------------------------------------ ----------- ------------- --------- --------- ---------
Asset-backed securities Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Bank and/or Savings and Loan Y Y Y
obligations
------------------------------------ ----------- ------------- --------- --------- ---------
Repurchase agreements Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Derivatives Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Reverse repurchase agreements Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Warrants Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Futures Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Options Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Foreign currencies Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Forward currency contracts Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Borrowing money Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Lending portfolio securities Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Investment of securities lending Y Y Y
collateral
------------------------------------ ----------- ----------- ------------ --------- ---------
Short sales Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Participation Interests
------------------------------------ ----------- ------------- --------- --------- ---------
Swap Agreements Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Credit Default Swaps Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Wrap Contracts
------------------------------------ ----------- ------------- --------- --------- ---------
Indexed securities Y Y Y Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Strip Bonds Y
------------------------------------ ----------- ------------- --------- --------- ---------
Put Bonds Y
------------------------------------ ----------- ------------- --------- --------- ---------
Private Activity and Industrial
Development Bonds
------------------------------------ ----------- ------------- --------- --------- ---------
Custodial Receipts Y
------------------------------------ ----------- ------------- --------- --------- ---------
Nationwide Contract
------------------------------------ ----------- ------------- --------- --------- ---------
Extendable Commercial Notes Y Y
------------------------------------ ----------- ------------- --------- --------- ---------
Standby Commitment Agreements
------------------------------------ ----------- ------------- --------- --------- ---------
Municipal Securities
------------------------------------ ----------- ------------- --------- --------- ---------
Equity Linked Notes Y
------------------------------------ ----------- ------------- --------- --------- ---------
Exchange Traded Funds Y
------------------------------------ ----------- ------------- --------- --------- ---------
|
DESCRIPTION OF PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
THE INDEX FUNDS
The Gartmore Small Cap Index Fund, Gartmore S&P 500 Index Fund, Gartmore Mid Cap Market Index Fund, Gartmore International Index Fund and Gartmore Bond Index Fund will be referred to herein, collectively, as the "Index Funds."
S&P 500 INDEX FUND. The investment objective of the S&P 500 Index Fund is to seek to provide investment results that correspond to the price and yield performance of publicly traded common stocks as represented by the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). There can be no assurance that the investment objective of the Fund will be achieved.
SMALL CAP INDEX FUND. The investment objective of the Small Cap Index Fund is to match the performance of the Russell 2000(R) Index (the "Russell 2000") as closely as possible before the deduction of Fund expenses. There can be no assurance that the investment objective of the Fund will be achieved.
MID CAP MARKET INDEX FUND. The investment objective of the Mid Cap
Market Index Fund is to match the performance of the Standard & Poor's Mid Cap
400(R) Index (the "S&P 400") as closely as possible before the deduction of Fund
expenses. There can be no assurance that the investment objective of the Fund
will be achieved.
BOND INDEX FUND. The investment objective of the Bond Index Fund is to match the performance of the Lehman Brothers Aggregate Bond Index (the "Aggregate Bond Index") as closely as possible before the deduction of Fund expenses. There can be no assurance that the investment objective of the Fund will be achieved.
INTERNATIONAL INDEX FUND. The investment objective of the International Index Fund is to match the performance of the Morgan Stanley Capital International EAFE(R) Capitalization Weighted Index (the "EAFE Index") as closely as possible before the deduction of Fund expenses. There can be no assurance that the investment objective of the Fund will be achieved.
ABOUT INDEXING. The Index Funds are not managed according to traditional methods of "active" investment management, which involve the buying and selling of securities based upon economic, financial, and market analyses and investment judgment. Instead, each Index Fund, utilizing essentially a "passive" or "indexing" investment approach, seeks to replicate, before each Fund's expenses (which can be expected to reduce the total return of the Fund), the total return of its respective index.
INDEXING AND MANAGING THE FUNDS. Each Index Fund will be substantially invested in securities in the applicable index, and will invest at least 80% of its net assets in securities or other financial instruments which are contained in or correlated with securities in the applicable index (equity securities, in the case of the Small Cap Index Fund, Mid Cap Market Index Fund and International Index Fund, S&P 500 Index Fund, and fixed-income securities in the case of the Bond Index Fund).
Because each Index Fund seeks to replicate the total return of its respective index, BlackRock Investment Management, LLC ("BlackRock," formerly known as Fund Asset Management, L.P.), subadviser to each Index Fund, generally will not attempt to judge the merits of any particular security as an investment but will seek only to replicate the total return of the securities in the relevant index. However, BlackRock may omit or remove a security which is included in an index from the portfolio of an Index Fund if, following objective criteria, BlackRock judges the security to be insufficiently liquid, believes the merit of the investment has been substantially impaired by extraordinary events or financial conditions, or determines that the security is no longer useful in attempting to replicate the total return of the index.
BlackRock may acquire certain financial instruments based upon individual securities or based upon or consisting of one or more baskets of securities (which basket may be based upon a target index). Certain of these instruments may represent an indirect ownership interest in such securities or baskets. Others may provide for the payment to an Index Fund or by an Index Fund of amounts based upon the performance (positive, negative or both) of a particular security or basket. BlackRock will select such instruments when it
believes that the use of the instrument will correlate substantially with the expected total return of a target security or index. In connection with the use of such instruments, BlackRock may enter into short sales in an effort to adjust the weightings of particular securities represented in the basket to more accurately reflect such securities weightings in the target index.
The ability of each Index Fund to satisfy its investment objective depends to some extent on BlackRock's ability to manage cash flow (primarily from purchases and redemptions and distributions from the Fund's investments). BlackRock will make investment changes to an Index Fund's portfolio to accommodate cash flow while continuing to seek to replicate the total return of the target index. Investors should also be aware that the investment performance of each index is a hypothetical number which does not take into account brokerage commissions and other transaction costs, custody and other costs of investing, and any incremental operating costs (e.g., transfer agency, accounting) that will be borne by the Index Funds.
Each Index Fund's ability to replicate the total return of its respective index may be affected by, among other things, transaction costs, administration and other expenses incurred by the Index Fund, taxes (including foreign withholding taxes, which will affect the International Index Fund and the Bond Index Fund due to foreign tax withholding practices), and changes in either the composition of the index or the assets of an Index Fund. In addition, each Index Fund's total return will be affected by incremental operating costs (e.g., investment advisory, transfer agency, accounting) that will be borne by the Fund. Under normal circumstances, it is anticipated that each Index Fund's total return over periods of one year and longer will, on a gross basis and before taking into account Fund expenses, be within 10 basis points for the S&P 500 Index Fund (a basis point is one one-hundredth of one percent (0.01%)), 100 basis points for the Small Cap Index Fund, 150 basis points for the Mid Cap Market Index Fund, 50 basis points for the International Index Fund, and 50 basis points for the Bond Index Fund, of the total return of the applicable indices. There can be no assurance, however, that these levels of correlation will be achieved. In the event that this correlation is not achieved over time, the Trustees will consider alternative strategies for the Funds.
THE FUNDS OF FUNDS
Each of the Investor Destinations Funds and the Optimal Allocations Funds is a "fund of funds," which means that each such Fund invests primarily in other mutual funds. The Prospectuses for the Funds of Funds discuss the investment objectives and strategies for such Funds and explains the types of underlying mutual funds (the "Underlying Funds") in which each Fund of Funds may invest. Underlying Funds invest in stocks, bonds and other securities and reflect varying amounts of potential investment risk and reward. Each Fund of Funds allocates its assets among the different Underlying Funds, and each of the Investor Destinations Funds - except for the Investor Destinations Aggressive Fund currently - invests in the Nationwide contract (described in more detail below). Periodically, each Fund of Funds will adjust its asset allocation target ranges to ensure broad diversification and to adjust to changes in market conditions.
INFORMATION CONCERNING DURATION
Duration is a measure of the average life of a fixed-income security that was developed as a more precise alternative to the concepts of "term to maturity" or "average dollar weighted maturity" as measures of "volatility" or "risk" associated with changes in interest rates. Duration incorporates a security's yield, coupon interest payments, final maturity and call features into one measure.
Most debt obligations provide interest ("coupon") payments in addition to final ("par") payment at maturity. Some obligations also have call provisions. Depending on the relative magnitude of these payments and the nature of the call provisions, the market values of debt obligations may respond differently to changes in interest rates.
Traditionally, a debt security's "term-to-maturity" has been used as a measure of the sensitivity of the security's price to changes in interest rates (which is the "interest rate risk" or "volatility" of the security). However, "term-to-maturity" measures only the time until a debt security provides its final payment, taking no account of the pattern of the security's payments prior to maturity. Average dollar weighted maturity is calculated by averaging the terms of maturity of each debt security held with each maturity "weighted" according to the percentage of assets that it represents. Duration is a measure of the expected life of a debt security on a present value basis and reflects both principal and interest payments. Duration takes the length of the time
intervals between the present time and the time that the interest and principal payments are scheduled or, in the case of a callable security, expected to be received, and weights them by the present values of the cash to be received at each future point in time. For any debt security with interest payments occurring prior to the payment of principal, duration is ordinarily less than maturity. In general, all other factors being the same, the lower the stated or coupon rate of interest of a debt security, the longer the duration of the security; conversely, the higher the stated or coupon rate of interest of a debt security, the shorter the duration of the security.
There are some situations where the standard duration calculation does not properly reflect the interest rate exposure of a security. For example, floating and variable rate securities often have final maturities of ten or more years; however, their interest rate exposure corresponds to the frequency of the coupon reset. Another example where the interest rate exposure is not properly captured by duration is the case of mortgage pass-through securities. The stated final maturity of such securities is generally 30 years, but current prepayment rates are more critical in determining the securities' interest rate exposure. In these and other similar situations, a Fund's investment adviser or subadviser will use more sophisticated analytical techniques to project the economic life of a security and estimate its interest rate exposure. Since the computation of duration is based on predictions of future events rather than known factors, there can be no assurance that a Fund will at all times achieve its targeted portfolio duration.
The change in market value of U.S. government fixed-income securities is largely a function of changes in the prevailing level of interest rates. When interest rates are falling, a portfolio with a shorter duration generally will not generate as high a level of total return as a portfolio with a longer duration. When interest rates are stable, shorter duration portfolios generally will not generate as high a level of total return as longer duration portfolios (assuming that long-term interest rates are higher than short-term rates, which is commonly the case.) When interest rates are rising, a portfolio with a shorter duration will generally outperform longer duration portfolios. With respect to the composition of a fixed-income portfolio, the longer the duration of the portfolio, generally, the greater the anticipated potential for total return, with, however, greater attendant interest rate risk and price volatility than for a portfolio with a shorter duration.
DEBT OBLIGATIONS
Debt obligations are subject to the risk of an issuer's inability to meet principal and interest payments on its obligations when due ("credit risk") and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, and general market liquidity. Lower-rated securities are more likely to react to developments affecting these risks than are more highly rated securities, which react primarily to movements in the general level of interest rates. Although the fluctuation in the price of debt securities is normally less than that of common stocks, in the past there have been extended periods of cyclical increases in interest rates that have caused significant declines in the price of debt securities in general and have caused the effective maturity of securities with prepayment features to be extended, thus effectively converting short or intermediate securities (which tend to be less volatile in price) into long term securities (which tend to be more volatile in price).
RATINGS AS INVESTMENT CRITERIA. High-quality, medium-quality and non-investment grade debt obligations are characterized as such based on their ratings by nationally recognized statistical rating organizations ("NRSROs"), such as Standard & Poor's Rating Group ("Standard & Poor's") or Moody's Investor Services ("Moody's"). In general, the ratings of NRSROs represent the opinions of these agencies as to the quality of securities that they rate. Such ratings, however, are relative and subjective, and are not absolute standards of quality and do not evaluate the market value risk of the securities. These ratings are used by a Fund as initial criteria for the selection of portfolio securities, but the Fund also relies upon the independent advice of a Fund's adviser or subadviser(s) to evaluate potential investments. This is particularly important for lower-quality securities. Among the factors that will be considered is the long-term ability of the issuer to pay principal and interest and general economic trends, as well as an issuer's capital structure, existing debt and earnings history. The Appendix to this Statement of Additional Information contains further information about the rating categories of NRSROs and their significance.
Subsequent to its purchase by a Fund, an issuer of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by such Fund. In addition, it is possible that an NRSRO might not change its rating of a particular issuer to reflect subsequent events. None of these events
generally will require sale of such securities, but a Fund's adviser or subadviser will consider such events in its determination of whether the Fund should continue to hold the securities.
In addition, to the extent that the ratings change as a result of changes in an NRSRO or its rating systems, or due to a corporate reorganization, the Fund will attempt to use comparable ratings as standards for its investments in accordance with its investment objective and policies.
MEDIUM-QUALITY SECURITIES. Certain Funds anticipate investing in medium-quality obligations, which are obligations rated in the fourth highest rating category by any NRSRO. Medium-quality securities, although considered investment-grade, may have some speculative characteristics and may be subject to greater fluctuations in value than higher-rated securities. In addition, the issuers of medium-quality securities may be more vulnerable to adverse economic conditions or changing circumstances than issuers of higher-rated securities.
LOWER QUALITY (HIGH-RISK) SECURITIES. Non-investment grade debt or lower quality/rated securities, a.k.a. junk bonds (hereinafter referred to as "lower-quality securities") include (i) bonds rated as low as C by Moody's, Standard & Poor's, or Fitch, Inc. ("Fitch"), (ii) commercial paper rated as low as C by Standard & Poor's, Not Prime by Moody's or Fitch 4 by Fitch; and (iii) unrated debt securities of comparable quality. Lower-quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. There is more risk associated with these investments because of reduced creditworthiness and increased risk of default. Under NRSRO guidelines, lower-quality securities and comparable unrated securities will likely have some quality and protective characteristics that are outweighed by large uncertainties or major risk exposures to adverse conditions. Lower-quality securities are considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default or to be in default, to be unlikely to have the capacity to make required interest payments and repay principal when due in the event of adverse business, financial or economic conditions, or to be in default or not current in the payment of interest or principal. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below.
EFFECT OF INTEREST RATES AND ECONOMIC CHANGES. Interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality and comparable unrated securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations may also be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities also because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower-quality or comparable unrated security defaulted, the Fund might incur additional expenses to seek recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of these securities and thus in the Fund's net asset value.
As previously stated, the value of a lower-quality or comparable unrated security will generally decrease in a rising interest rate market, and accordingly so will a Fund's net asset value. If a Fund experiences unexpected net redemptions in such a market, it may be forced to liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of lower-quality and comparable unrated securities (discussed below), a Fund may be forced to liquidate these securities at a substantial discount which would result in a lower rate of return to the Fund.
PAYMENT EXPECTATIONS. Lower-quality and comparable unrated securities typically contain redemption, call or prepayment provisions which permit the issuer of such securities containing such provisions to, at its discretion, redeem the securities. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities at a lower interest rate. To the extent an issuer is
able to refinance the securities, or otherwise redeem them, a Fund may have to replace the securities with a lower yielding security, which would result in a lower return for that Fund.
LIQUIDITY AND VALUATION. A Fund may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower-quality and comparable unrated securities, there may be no established retail secondary market for many of these securities. The Funds anticipate that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. As a result, a Fund's net asset value and ability to dispose of particular securities, when necessary to meet such Fund's liquidity needs or in response to a specific economic event, may be impacted. The lack of a liquid secondary market for certain securities may also make it more difficult for a Fund to obtain accurate market quotations for purposes of valuing that Fund's portfolio. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of lower-quality and comparable unrated securities, especially in a thinly traded market.
U.S. GOVERNMENT SECURITIES. U.S. government securities are issued or guaranteed by the U.S. government or its agencies or instrumentalities. Securities issued by the U.S. government include U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities issued by government agencies or instrumentalities include obligations of the following:
- The Federal Housing Administration and the Farmers Home Administration;
- The Government National Mortgage Association ("GNMA"), including GNMA
pass-through certificates, which are backed by the full faith and credit of
the United States government;
- The Federal Home Loan Banks, whose securities are supported only by the
credit of such agency;
- The Federal Farm Credit Banks, government-sponsored institutions that
consolidate the financing activities of the Federal Land Banks, the Federal
Intermediate Credit Banks and the Banks for Cooperatives; and
- The Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal
National Mortgage Association ("FNMA"), whose securities are supported only
by the credit of such agencies and are not guaranteed by the U.S.
government. However, the Secretary of the Treasury has the authority to
support FHLMC and FNMA by purchasing limited amounts of their respective
obligations.
Although the U.S. government or it agencies provide financial support to such entities, no assurance can be given that they will always do so. The U.S. government and its agencies and instrumentalities do not guarantee the market value of their securities; consequently, the value of such securities will fluctuate.
The Federal Reserve creates STRIPS (Separate Trading of Registered Interest and Principal of Securities) by separating the coupon payments and the principal payment from an outstanding Treasury security and selling them as individual securities. To the extent a Fund purchases the principal portion of STRIPS, the Fund will not receive regular interest payments. Instead STRIPS are sold at a deep discount from their face value. Because the principal portion of the STRIPS does not pay current income, its price can be volatile when interest rates change. In calculating its dividend, the Fund takes into account as income a portion of the difference between the principal portion of the STRIPS' purchase price and its face value.
MORTGAGE AND ASSET-BACKED SECURITIES. Mortgage-backed securities represent direct or indirect participation in, or are secured by and payable from, mortgage loans secured by real property. Mortgage-backed securities come in different forms. The simplest form of mortgage-backed securities is pass-through certificates. Such securities may be issued or guaranteed by U.S. government agencies or instrumentalities or may be issued by private issuers, generally originators in mortgage loans, including savings and loan associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities (collectively, "private lenders"). The purchase of mortgage-backed securities from private lenders may entail greater risk than mortgage-backed securities that are issued or guaranteed by the U.S. government, its agencies or instrumentalities. Mortgage-backed securities issued by private lenders may be
supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. These credit enhancements may include letters of credit, reserve funds, over-collateralization, or guarantees by third parties.
Since privately-issued mortgage certificates are not guaranteed by an entity having the credit status of GNMA or FHLMC, such securities generally are structured with one or more types of credit enhancement. Such credit enhancement falls into two categories: (i) liquidity protection; and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provisions of advances, generally by the entity administering the pool of assets, to ensure that the pass-through of payments due on the underlying pool occurs in a timely fashion. Protection against losses resulting from ultimate default enhances the likelihood of ultimate payment of the obligations on at least a portion of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches.
The ratings of mortgage-backed securities for which third-party credit enhancement provides liquidity protection or protection against losses from default are generally dependent upon the continued creditworthiness of the provider of the credit enhancement. The ratings of such securities could be subject to reduction in the event of deterioration in the creditworthiness of the credit enhancement provider even in cases where the delinquency loss experienced on the underlying pool of assets is better than expected. There can be no assurance that the private issuers or credit enhancers of mortgage-backed securities will meet their obligations under the relevant policies or other forms of credit enhancement.
Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of "reserve funds" (where cash or investments sometimes funded from a portion of the payments on the underlying assets are held in reserve against future losses) and "over-collateralization" (where the scheduled payments on, or the principal amount of, the underlying assets exceed those required to make payment of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information with respect to the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that which is anticipated could adversely affect the return on an investment in such security.
Private lenders or government-related entities may also create mortgage loan pools offering pass-through investments where the mortgages underlying these securities may be alternative mortgage instruments, that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may be shorter than was previously customary. As new types of mortgage-related securities are developed and offered to investors, a Fund, consistent with its investment objective and policies, may consider making investments in such new types of securities.
The yield characteristics of mortgage-backed securities differ from those of traditional debt obligations. Among the principal differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other assets generally may be prepaid at any time. As a result, if a Fund purchases these securities at a premium, a prepayment rate that is faster than expected will reduce yield to maturity, while a prepayment rate that is slower than expected will have the opposite effect of increasing the yield to maturity. Conversely, if a Fund purchases these securities at a discount, a prepayment rate that is faster than expected will increase yield to maturity, while a prepayment rate that is slower than expected will reduce yield to maturity. Accelerated prepayments on securities purchased by the Fund at a premium also impose a risk of loss of principal because the premium may not have been fully amortized at the time the principal is prepaid in full.
Unlike fixed rate mortgage-backed securities, adjustable rate mortgage-backed securities are collateralized by or represent interest in mortgage loans with variable rates of interest. These variable rates of interest reset periodically to align themselves with market rates. A Fund will not benefit from increases in interest rates to the extent that interest rates rise to the point where they cause the current coupon of the underlying adjustable rate mortgages to exceed any maximum allowable annual or lifetime reset limits
(or "cap rates") for a particular mortgage. In this event, the value of the adjustable rate mortgage-backed securities in a Fund would likely decrease. Also, a Fund's net asset value could vary to the extent that current yields on adjustable rate mortgage-backed securities are different than market yields during interim periods between coupon reset dates or if the timing of changes to the index upon which the rate for the underlying mortgage is based lags behind changes in market rates. During periods of declining interest rates, income to a Fund derived from adjustable rate mortgage-backed securities which remain in a mortgage pool will decrease in contrast to the income on fixed rate mortgage-backed securities, which will remain constant. Adjustable rate mortgages also have less potential for appreciation in value as interest rates decline than do fixed rate investments.
There are a number of important differences among the agencies and instrumentalities of the U.S. government that issue mortgage-backed securities and among the securities that they issue. Mortgage-backed securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. GNMA certificates also are supported by the authority of GNMA to borrow funds from the U.S. Treasury to make payments under its guarantee. Mortgage-backed securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are solely the obligations of the FNMA and are not backed by or entitled to the full faith and credit of the United States. Fannie Maes are guaranteed as to timely payment of the principal and interest by FNMA. Mortgage-backed securities issued by FHLMC include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of the United States, created pursuant to an Act of Congress, which is owned entirely by Federal Home Loan Banks and do not constitute a debt or obligation of the United States or by any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When the FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount due on account of its guarantee of ultimate payment of principal at any time after default on an underlying mortgage, but in no event later than one year after it becomes payable.
Asset-backed securities have structural characteristics similar to mortgage-backed securities. However, the underlying assets are not first-lien mortgage loans or interests therein; rather they include assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property and receivables from credit card and other revolving credit arrangements. Payments or distributions of principal and interest on asset-backed securities may be supported by non-governmental credit enhancements similar to those utilized in connection with mortgage-backed securities. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND MULTICLASS PASS-THROUGH SECURITIES. CMOs are a more complex form of mortgage-backed security in that they are multi-class debt obligations which are collateralized by mortgage loans or pass-through certificates. As a result of changes prompted by the 1986 Tax Reform Act, most CMOs are today issued as Real Estate Mortgage Investment Conduits ("REMICs"). From the perspective of the investor, REMICs and CMOs are virtually indistinguishable. However, REMICs differ from CMOs in that REMICs provide certain tax advantages for the issuer of the obligation. Multiclass pass-through securities are interests in a trust composed of whole loans or private pass-throughs (collectively hereinafter referred to as "Mortgage Assets"). Unless the context indicates otherwise, all references herein to CMOs include REMICs and multiclass pass-through securities.
Typically, CMOs are collateralized by GNMA, Fannie Mae or Freddie Mac Certificates, but also may be collateralized by Mortgage Assets. Unless the context indicates otherwise, all references herein to CMOs include REMICs and multiclass pass-through securities. Payments of principal and interest on the Mortgage Assets, and any reinvestment income thereon, provide the funds to pay debt service on the CMOs or make scheduled distributions on the multiclass pass-through securities. CMOs may be issued by agencies or instrumentalities of the U.S. government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing.
In order to form a CMO, the issuer assembles a package of traditional mortgage-backed pass-through securities, or actual mortgage loans, and uses them as collateral for a multi-class security. Each class of CMOs, often referred to as a "tranche," is issued at a specified fixed or floating coupon rate and has a stated maturity or final distribution date. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semi-annual basis. The principal of and interest on the Mortgage Assets may be allocated among the several classes of a series of a CMO in innumerable ways. In one structure, payments of principal, including any principal prepayments, on the Mortgage Assets are applied to the classes of a CMO in the order of their respective stated maturities or final distribution dates, so that no payment of principal will be made on any class of CMOs until all other classes having an earlier stated maturity or final distribution date have been paid in full. As market conditions change, and particularly during periods of rapid or unanticipated changes in market interest rates, the attractiveness of the CMO classes and the ability of the structure to provide the anticipated investment characteristics may be significantly reduced. Such changes can result in volatility in the market value, and in some instances reduced liquidity, of the CMO class.
A Fund may also invest in, among others, parallel pay CMOs and Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of principal on each payment date to more than one class. These simultaneous payments are taken into account in calculating the stated maturity date or final distribution date of each class, which, as with other CMO structures, must be retired by its stated maturity date or a final distribution date but may be retired earlier. PAC Bonds are a type of CMO tranche or series designed to provide relatively predictable payments of principal provided that, among other things, the actual prepayment experience on the underlying mortgage loans falls within a predefined range. If the actual prepayment experience on the underlying mortgage loans is at a rate faster or slower than the predefined range or if deviations from other assumptions occur, principal payments on the PAC Bond may be earlier or later than predicted. The magnitude of the predefined range varies from one PAC Bond to another; a narrower range increases the risk that prepayments on the PAC Bond will be greater or smaller than predicted. Because of these features, PAC Bonds generally are less subject to the risks of prepayment than are other types of mortgage-backed securities.
STRIPPED MORTGAGE SECURITIES. Stripped mortgage securities are derivative multiclass mortgage securities. Stripped mortgage securities may be issued by agencies or instrumentalities of the U.S. government, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped mortgage securities have greater volatility than other types of mortgage securities. Although stripped mortgage securities are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, stripped mortgage securities are generally illiquid.
Stripped mortgage securities are structured with two or more classes of securities that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of stripped mortgage security will have at least one class receiving only a small portion of the interest and a larger portion of the principal from the mortgage assets, while the other class will receive primarily interest and only a small portion of the principal. In the most extreme case, one class will receive all of the interest ("IO" or interest-only), while the other class will receive the entire principal ("PO" or principal-only class). The yield to maturity on IOs, POs and other mortgage-backed securities that are purchased at a substantial premium or discount generally are extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on such securities' yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities have received the highest rating by a NRSRO.
In addition to the stripped mortgage securities described above, certain Funds may invest in similar securities such as Super POs and Levered IOs which are more volatile than POs, IOs and IOettes. Risks associated with instruments such as Super POs are similar in nature to those risks related to investments in POs. IOettes represent the right to receive interest payments on an underlying pool of mortgages with similar risks as those associated with IOs. Unlike IOs, the owner also has the right to receive a very small portion of the principal. Risks connected with Levered IOs and IOettes are similar in nature to those associated with IOs. Such Funds may also invest in other similar instruments developed in the future that are deemed consistent with its investment objective, policies and restrictions. See "Additional General Tax Information For All Funds" in this Statement of Additional Information.
A Fund may also purchase stripped mortgage-backed securities for hedging purposes to protect that Fund against interest rate fluctuations. For example, since an IO will tend to increase in value as interest rates rise, it may be utilized to hedge against a decrease in value of other fixed-income securities in a rising interest rate environment. With respect to IOs, if the underlying mortgage securities experience greater than anticipated prepayments of principal, the Fund may fail to recoup fully its initial investment in these securities even if the securities are rated in the highest rating category by a NRSRO. Stripped mortgage-backed securities may exhibit greater price volatility than ordinary debt securities because of the manner in which their principal and interest are returned to investors. The market value of the class consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. The yields on stripped mortgage-backed securities that receive all or most of the interest are generally higher than prevailing market yields on other mortgage-backed obligations because their cash flow patterns are also volatile and there is a greater risk that the initial investment will not be fully recouped. The market for CMOs and other stripped mortgage-backed securities may be less liquid if these securities lose their value as a result of changes in interest rates; in that case, a Fund may have difficulty in selling such securities.
PRIVATE ACTIVITY AND INDUSTRIAL DEVELOPMENT BONDS. Private activity and industrial development bonds are obligations issued by or on behalf of public authorities to raise money to finance various privately owned or operated facilities for business and manufacturing, housing, sports, and pollution control. These bonds are also used to finance public facilities such as airports, mass transit systems, ports, parking, and sewage and solid waste disposal facilities, as well as certain other facilities or projects. The payment of the principal and interest on such bonds is generally dependent solely on the ability of the facility's user to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment.
PUT BONDS. "Put" bonds are securities (including securities with variable interest rates) that may be sold back to the issuer of the security at face value at the option of the holder prior to their stated maturity. The Fund's adviser or a subadviser intends to purchase only those put bonds for which the put option is an integral part of the security as originally issued. The option to "put" the bond back to the issuer prior to the stated final maturity can cushion the price decline of the bond in a rising interest rate environment. However, the premium paid, if any, for an option to put will have the effect of reducing the yield otherwise payable on the underlying security. For the purpose of determining the "maturity" of securities purchased subject to an option to put, and for the purpose of determining the dollar weighted average maturity of a Fund holding such securities, the Fund will consider "maturity" to be the first date on which it has the right to demand payment from the issuer.
BRADY BONDS. Brady Bonds are debt securities, generally denominated in U.S. dollars, issued under the framework of the Brady Plan. The Brady Plan is an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. In restructuring its external debt under the Brady Plan framework, a debtor nation negotiates with its existing bank lenders as well as multilateral institutions such as the International Bank for Reconstruction and Development (the "World Bank") and the International Monetary Fund (the "IMF"). The Brady Plan framework, as it has developed, contemplates the exchange of external commercial bank debt for newly issued bonds known as "Brady Bonds." Brady Bonds may also be issued in respect of new money being advanced by existing lenders in connection with the debt restructuring. The World Bank and/or the IMF support the restructuring by providing funds pursuant to loan agreements or other arrangements that enable the debtor nation to collateralize the new Brady Bonds or to repurchase outstanding bank debt at a discount. Under these arrangements with the World Bank and/or the IMF, debtor nations have been required to agree to the implementation of certain domestic monetary and fiscal reforms. Such reforms have included the liberalization of trade and foreign investment, the privatization of state-owned enterprises and the setting of targets for public spending and borrowing. These policies and programs seek to promote the debtor country's economic growth and development. Investors should also recognize that the Brady Plan only sets forth general guiding principles for economic reform and debt reduction, emphasizing that solutions must be negotiated on a case-by-case basis between debtor nations and their creditors. A Fund's adviser or subadviser may believe that economic reforms undertaken by countries in connection with the issuance of Brady Bonds may make the debt of countries which have issued or have announced plans to issue Brady Bonds an attractive opportunity for investment. However, there can be no assurance that the adviser or the subadviser's expectations with respect to Brady Bonds will be realized.
Agreements implemented under the Brady Plan to date are designed to achieve debt and debt-service reduction through specific options negotiated by a debtor nation with its creditors. As a result, the financial packages offered by each country differ. The types of options have included the exchange of
outstanding commercial bank debt for bonds issued at 100% of face value of such debt which carry a below-market stated rate of interest (generally known as par bonds), bonds issued at a discount from the face value of such debt (generally known as discount bonds), bonds bearing an interest rate which increases over time and bonds issued in exchange for the advancement of new money by existing lenders. Regardless of the stated face amount and stated interest rate of the various types of Brady Bonds, the applicable Funds will purchase Brady Bonds in secondary markets, as described below, in which the price and yield to the investor reflect market conditions at the time of purchase. Certain sovereign bonds are entitled to "value recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Certain Brady Bonds have been collateralized as to principal due date at maturity (typically 30 years from the date of issuance) by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of such Brady Bonds. The U.S. Treasury bonds purchased as collateral for such Brady Bonds are financed by the IMF, the World Bank and the debtor nations' reserves. In addition, interest payments on certain types of Brady Bonds may be collateralized by cash or high-grade securities in amounts that typically represent between 12 and 18 months of interest accruals on these instruments with the balance of the interest accruals being uncollateralized. In the event of a default with respect to collateralized Brady Bonds as a result of which the payment obligations of the issuer are accelerated, the U.S. Treasury zero coupon obligations held as collateral for the payment of principal will not be distributed to investors, nor will such obligations be sold and the proceeds distributed. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds, which will continue to be outstanding, at which time the face amount of the collateral will equal the principal payments that would have then been due on the Brady Bonds in the normal course. However, in light of the residual risk of the Brady Bonds and, among other factors, the history of default with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds are considered speculative. A Fund may purchase Brady Bonds with no or limited collateralization, and, for payment of interest and (except in the case of principal collateralized Brady Bonds) principal, will be relying primarily on the willingness and ability of the foreign government to make payment in accordance with the terms of the Brady Bonds.
MUNICIPAL SECURITIES. Municipal securities include debt obligations issued by governmental entities to obtain funds for various public purposes, such as the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses, and the extension of loans to other public institutions and facilities. Private activity bonds that are issued by or on behalf of public authorities to finance various privately-operated facilities are deemed to be municipal securities, only if the interest paid thereon is exempt from federal taxes. The Gartmore Tax-Free Income Fund will invest primarily in municipal securities. In addition, the Gartmore Money Market Fund may invest in municipal securities whether or not the interest paid is tax exempt as long as the securities are acceptable investments for money market funds.
Other types of municipal securities include short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of short-term tax-exempt loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements or other revenues. In addition, the Gartmore Tax-Free Income Fund may invest in other types of tax-exempt instruments, such as municipal bonds, private activity bonds, and pollution control bonds.
Project Notes are issued by a state or local housing agency and are sold by the Department of Housing and Urban Development. While the issuing agency has the primary obligation with respect to its Project Notes, they are also secured by the full faith and credit of the United States through agreements with the issuing authority which provide that, if required, the federal government will lend the issuer an amount equal to the principal of and interest on the Project Notes.
The two principal classifications of municipal securities consist of "general obligation" and "revenue" issues. The Gartmore Tax-Free Income Fund may also acquire "moral obligation" issues, which are normally issued by special purpose authorities. There are, of course, variations in the quality of municipal securities, both within a particular classification and between classifications, and the yields on municipal securities depend upon a variety of factors, including the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. Ratings represent the opinions of an NRSRO as to the quality of municipal securities. It should be emphasized, however, that ratings are general and are not absolute standards of quality, and municipal securities with the same maturity, interest rate and rating may have different yields, while municipal securities of the same maturity and interest rate with different ratings may have the same yield. Subsequent to purchase, an
issue of municipal securities may cease to be rated or its rating may be reduced below the minimum rating required for purchase. The adviser will consider such an event in determining whether a Fund should continue to hold the obligation.
An issuer's obligations under its municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors, such as the federal bankruptcy code, and laws, if any, which may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon the enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its municipal securities may be materially adversely affected by litigation or other conditions.
STRIP BONDS. Strip bonds are debt securities that are stripped of their interest (usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates more in response to changes in interest rates than interest paying securities of comparable maturity.
CUSTODIAL RECEIPTS. Certain Funds may acquire U.S. government securities and their unmatured interest coupons that have been separated ("stripped") by their holder, typically a custodian bank or investment brokerage firm. Having separated the interest coupons from the underlying principal of the U.S. government securities, the holder will resell the stripped securities in custodial receipt programs with a number of different names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold separately from the underlying principal, which is usually sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments. The underlying U.S. Treasury bonds and notes themselves are generally held in book-entry form at a Federal Reserve Bank. Counsel to the underwriters of these certificates or other evidences of ownership of U.S. Treasury securities have stated that, in their opinion, purchasers of the stripped securities most likely will be deemed the beneficial holders of the underlying U.S. government securities for federal tax and securities purposes. In the case of CATS and TIGRs, the Internal Revenue Service ("IRS") has reached this conclusion for the purpose of applying the tax diversification requirements applicable to regulated investment companies such as the Funds. CATS and TIGRs are not considered U.S. government securities by the Staff of the Securities and Exchange Commission (the "SEC"), however. Further, the IRS conclusion is contained only in a general counsel memorandum, which is an internal document of no precedential value or binding effect, and a private letter ruling, which also may not be relied upon by the Funds. The Trust is not aware of any binding legislative, judicial or administrative authority on this issue.
TIPS BONDS. TIPS are fixed-income securities issued by the U.S. Treasury whose principal value is periodically adjusted according to the rate of inflation. The U.S. Treasury uses a structure that accrues inflation into the principal value of the bond. Inflation-indexed securities issued by the U.S. Treasury have maturities of five, ten or thirty years, although it is possible that securities with other maturities will be issued in the future. TIPS bonds typically pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted amount. For example, if a Fund purchased an inflation-indexed bond with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5% semi-annually), and inflation over the first six months was 1%, the mid-year par value of the bond would be $1,010 and the first semi-annual interest payment would be $15.15 ($1,010 times 1.5%). If inflation during the second half of the year resulted in the whole year's inflation equaling 3%, the end-of-year par value of the bond would be $1,030 and the second semi-annual interest payment would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal value of inflation-indexed bonds will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed and will fluctuate.
The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates in turn are tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-indexed bonds. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-indexed bonds.
While these securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. There can be no assurance that the CPI-U will accurately measure the real rate of inflation in the prices of goods and services.
Any increase in the principal amount of an inflation-indexed bond will be considered taxable ordinary income, even though investors do not receive their principal until maturity.
MONEY MARKET INSTRUMENTS
Money market instruments may include the following types of instruments:
o obligations issued or guaranteed as to interest and principal by the U.S. government, its agencies, or instrumentalities, or any federally chartered corporation, with remaining maturities of 397 days or less;
o obligations of sovereign foreign governments, their agencies, instrumentalities and political subdivisions, with remaining maturities of 397 days or less;
o obligations of municipalities and states, their agencies and political subdivisions with remaining maturities of 397 days or less;
o asset-backed commercial paper whose own rating or the rating of any guarantor is in one of the two highest categories of any NRSRO;
o repurchase agreements;
o bank or savings and loan obligations;
o commercial paper (including asset-backed commercial paper), which are short-term unsecured promissory notes issued by corporations in order to finance their current operations. It may also be issued by foreign governments, and states and municipalities. Generally the commercial paper or its guarantor will be rated within the top two rating categories by a NRSRO, or if not rated, is issued and guaranteed as to payment of principal and interest by companies which at the date of investment have a high quality outstanding debt issue;
o bank loan participation agreements representing obligations of corporations having a high quality short-term rating, at the date of investment, and under which the Fund will look to the creditworthiness of the lender bank, which is obligated to make payments of principal and interest on the loan, as well as to creditworthiness of the borrower;
o high quality short-term (maturity in 397 days or less) corporate obligations, rated within the top two rating categories by a NRSRO or, if not rated, deemed to be of comparable quality by the applicable adviser or subadviser;
o extendable commercial notes, which differ from traditional commercial paper because the issuer can extend the maturity of the note up to 397 days with the option to call the note any time during the extension period. Because extension will occur when the issuer does not have other viable options for lending, these notes may be considered illiquid, particularly during the
extension period, and if the extendable commercial notes are determined to be illiquid, the Gartmore Money Market Fund will be limited to holding no more than 10% of its net assets in these and any other illiquid securities; and
o unrated short-term (maturing in 397 days or less) debt obligations that are determined by a Fund's adviser to be of comparable quality to the securities described above.
EXTENDABLE COMMERCIAL NOTES
The Gartmore Money Market Fund may invest in extendable commercial notes (ECNs). ECNs may serve as an alternative to traditional commercial paper investments. ECNs are corporate notes which are issued at a discount and structured such that, while the note has an initial redemption date (the initial redemption date is no more than 90 days from the date of issue) upon which the notes will be redeemed, the issuer on the initial redemption date may extend the repayment of the notes for up to 397 days from the date of issue without seeking note holder consent. In the event the ECN is redeemed by the issuer on its initial redemption date, investors receive a premium step-up rate, which is based on the ECNs rating at the time. If the notes are not redeemed on the initial redemption date, they will bear interest from the initial redemption date to the maturity date of the note at a floating rate of interest (this interest serves as a penalty yield for the issuer and a premium paid to the investor).
The ability of the issuer to exercise its option to extend the ECN beyond the initial redemption date can expose investors to interest rate risks, liquidity risks, credit risks and mark-to-market risks. Proponents of ECNs, however, argue that the punitive interest rate which applies if the ECN is extended beyond its initial redemption date will discourage issuers from extending the notes. Proponents further argue that the reputation risk associated with the decision to extend an ECN obligation will prevent issuers from extending the notes, provided that the issuer is not in extreme financial distress. The Gartmore Money Market Fund will perform due diligence from both a credit and portfolio structure perspective before investing in ECNs.
REPURCHASE AGREEMENTS
In connection with the purchase by a Fund of a repurchase agreement from member banks of the Federal Reserve System or certain non-bank dealers, the Fund's custodian, or a subcustodian, will have custody of, and will segregate securities acquired by the Fund under such repurchase agreement. Repurchase agreements are contracts under which the buyer of a security simultaneously commits to resell the security to the seller at an agreed-upon price and date. Repurchase agreements are considered by the staff of the SEC to be loans by the Fund. Repurchase agreements may be entered into with respect to securities of the type in which the Fund may invest or government securities regardless of their remaining maturities, and will require that additional securities be deposited if the value of the securities purchased should decrease below resale price. Repurchase agreements involve certain risks in the event of default or insolvency by the other party, including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities, the risk of a possible decline in the value of the underlying securities during the period in which a Fund seeks to assert its rights to them, the risk of incurring expenses associated with asserting those rights and the risk of losing all or part of the income from the repurchase agreement. A Fund's adviser or subadviser reviews the creditworthiness of those banks and non-bank dealers with which the Funds enter into repurchase agreements to evaluate these risks.
BANK OBLIGATIONS
Bank obligations that may be purchased by the Funds include certificates of deposit, bankers' acceptances and fixed time deposits. A certificate of deposit is a short-term negotiable certificate issued by a commercial bank against funds deposited in the bank and is either interest-bearing or purchased on a discount basis. A bankers' acceptance is a short-term draft drawn on a commercial bank by a borrower, usually in connection with an international commercial transaction. The borrower is liable for payment as is the bank, which unconditionally guarantees to pay the draft at its face amount on the maturity date. Fixed time deposits are obligations of branches of U.S. banks or foreign banks which are payable at a stated maturity date and bear a fixed rate of interest. Although fixed time deposits do not have a market, there are no contractual restrictions on the right to transfer a beneficial interest in the deposit to a third party.
Bank obligations may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulation. Bank obligations may be issued by domestic banks (including their branches located outside the United States), domestic and foreign branches of foreign banks and savings and loan associations.
EURODOLLAR AND YANKEE OBLIGATIONS. Eurodollar bank obligations are dollar-denominated certificates of deposit and time deposits issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated obligations issued in the U.S. capital markets by foreign banks.
Eurodollar and Yankee bank obligations are subject to the same risks that pertain to domestic issues, notably credit risk, market risk and liquidity risk. Additionally, Eurodollar (and to a limited extent, Yankee) bank obligations are subject to certain sovereign risks and other risks associated with foreign investments. One such risk is the possibility that a sovereign country might prevent capital, in the form of dollars, from flowing across their borders. Other risks include: adverse political and economic developments; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes, and the expropriation or nationalization of foreign issues. However, Eurodollar and Yankee bank obligations held in a Fund will undergo the same credit analysis as domestic issuers in which the Fund invests, and will have at least the same financial strength as the domestic issuers approved for the Fund.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS
When securities are purchased on a "when-issued" basis or purchased for delayed delivery, then payment and delivery occur beyond the normal settlement date at a stated price and yield. When-issued transactions normally settle within 45 days. The payment obligation and the interest rate that will be received on when-issued securities are fixed at the time the buyer enters into the commitment. Due to fluctuations in the value of securities purchased or sold on a when-issued or delayed-delivery basis, the yields obtained on such securities may be higher or lower than the yields available in the market on the dates when the investments are actually delivered to the buyers. The greater a Fund's outstanding commitments for these securities, the greater the exposure to potential fluctuations in the net asset value of a Fund. Purchasing when-issued or delayed-delivery securities may involve the additional risk that the yield or market price available in the market when the delivery occurs may be higher or the market price lower than that obtained at the time of commitment.
When a Fund agrees to purchase when-issued or delayed-delivery securities, to the extent required by the SEC, its custodian will set aside permissible liquid assets equal to the amount of the commitment in a segregated account. Normally, the custodian will set aside portfolio securities to satisfy a purchase commitment, and in such a case a Fund may be required subsequently to place additional assets in the segregated account in order to ensure that the value of the account remains equal to the amount of such Fund's commitment. It may be expected that the Fund's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. In addition, because the Fund will set aside cash or liquid portfolio securities to satisfy its purchase commitments in the manner described above, such Fund's liquidity and the ability of its adviser or subadviser to manage it might be affected in the event its commitments to purchase "when-issued" securities ever exceed 25% of the value of its total assets. Under normal market conditions, however, a Fund's commitment to purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of the value of its total assets. When a Fund engages in when-issued or delayed-delivery transactions, it relies on the other party to consummate the trade. Failure of the seller to do so may result in a Fund incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
STANDBY COMMITMENT AGREEMENTS
These agreements commit a Fund, for a stated period of time, to purchase a stated amount of fixed income securities that may be issued and sold to the Fund at the option of the issuer. The price and coupon of the security is fixed at the time of the commitment. At the time of entering into the agreement the Fund is paid a commitment fee, regardless of whether or not the security is ultimately issued. Funds enter into such agreements for the purpose of investing in the security underlying the commitment at a yield and price that is considered advantageous to the Fund.
There can be no assurance that the securities subject to a standby commitment will be issued and the value of the security, if issued, on the delivery date may be more or less than its purchase price. Since the issuance of the security underlying the commitment is at the option of the issuer, a Fund may bear the risk of a decline in the value of such security and may not benefit from appreciation in the value of the security during the commitment period if the security is not ultimately issued.
The purchase of a security subject to a standby commitment agreement and the related commitment fee will be recorded on the date on which the security can reasonably be expected to be issued, and the value of the security will thereafter be reflected in the calculation of a Fund's net asset value. The cost basis of the security will be adjusted by the amount of the commitment fee. In the event the security is not issued, the commitment fee will be recorded as income on the expiration date of the standby commitment.
LENDING PORTFOLIO SECURITIES
Each Fund may lend its portfolio securities to brokers, dealers and other financial institutions, provided it receives collateral, with respect to each loan of U.S. securities, equal to at least 102% of the value of the portfolio securities loaned, and, with respect to each loan of non-U.S. securities, collateral of at least 105% of the value of the portfolio securities loaned, and at all times thereafter shall require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities so loaned. By lending its portfolio securities, a Fund can increase its income through the investment of the collateral. For the purposes of this policy, the Fund considers collateral consisting of cash, U.S. government securities or letters of credit issued by banks whose securities meet the standards for investment by the Fund to be the equivalent of cash. From time to time, a Fund may return to the borrower or a third party which is unaffiliated with it, and which is acting as a "placing broker," a part of the interest earned from the investment of collateral received for securities loaned.
The SEC currently requires that the following conditions must be met
whenever portfolio securities are loaned: (1) a Fund must receive from the
borrower collateral equal to at least 100% of the value of the portfolio
securities loaned; (2) the borrower must increase such collateral whenever the
market value of the securities loaned rises above the level of such collateral;
(3) a Fund must be able to terminate the loan at any time; (4) a Fund must
receive reasonable interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and any increase in market
value; (5) a Fund may pay only reasonable custodian fees in connection with the
loan; and (6) while any voting rights on the loaned securities may pass to the
borrower, a Fund's board of trustees must be able to terminate the loan and
regain the right to vote the securities if a material event adversely affecting
the investment occurs. These conditions may be subject to future modification.
Loan agreements involve certain risks in the event of default or insolvency of
the other party including possible delays or restrictions upon the Fund's
ability to recover the loaned securities or dispose of the collateral for the
loan.
INVESTMENT OF SECURITIES LENDING COLLATERAL. The collateral received from a borrower as a result of a Fund's securities lending activities will be used to purchase both fixed-income securities and other securities with debt-like characteristics that are rated A1 or P1 on a fixed rate or floating rate basis, including: bank obligations; commercial paper; investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company; loan participations; master notes; medium term notes; repurchase agreements; and U.S. government securities. Except for the investment agreements, funding agreements or guaranteed investment contracts guaranteed by an insurance company, master notes, and medium term notes (which are described below), these types of investments are described elsewhere in the SAI. Collateral may also be invested in a money market mutual fund or short-term collective investment trust.
Investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company are agreements where an insurance company either provides for the investment of the Fund's assets or provides for a minimum guaranteed rate of return to the investor.
Master notes are promissory notes issued usually with large, creditworthy broker-dealers on either a fixed rate or floating rate basis. Master notes may or may not be collateralized by underlying securities. If the master note is issued by an unrated subsidiary of a broker-dealer, then an unconditional guarantee is provided by the issuer's parent.
Medium term notes are unsecured, continuously offered corporate debt obligations. Although medium term notes may be offered with a maturity from one to ten years, in the context of securities lending collateral, the maturity of the medium term note will not generally exceed two years.
INDEXED SECURITIES
Certain Funds may invest in securities whose potential return is based on the change in particular measurements of value or rates (an "index"). As an illustration, the Funds may invest in a debt security that pays interest and returns principal based on the change in the value of a securities index or a basket of securities. If a Fund invests in such securities, it may be subject to reduced or eliminated interest payments or loss of principal in the event of an adverse movement in the relevant index.
SMALL COMPANY AND EMERGING GROWTH STOCKS
Investing in securities of small-sized, including micro-capitalization companies and emerging growth companies, may involve greater risks than investing in the stocks of larger, more established companies, including possible risk of loss. Also, because these securities may have limited marketability, their prices may be more volatile than securities of larger, more established companies or the market averages in general. Because small-sized and emerging growth companies normally have fewer shares outstanding than larger companies, it may be more difficult for a Fund to buy or sell significant numbers of such shares without an unfavorable impact on prevailing prices. Small-sized and emerging growth companies may have limited product lines, markets or financial resources and may lack management depth. In addition, small-sized and emerging growth companies are typically subject to wider variations in earnings and business prospects than are larger, more established companies. There is typically less publicly available information concerning small-sized and emerging growth companies than for larger, more established ones.
SPECIAL SITUATION COMPANIES
"Special situation companies" include those involved in an actual or prospective acquisition or consolidation; reorganization; recapitalization; merger, liquidation or distribution of cash, securities or other assets; a tender or exchange offer; a breakup or workout of a holding company; or litigation which, if resolved favorably, would improve the value of the company's stock. If the actual or prospective situation does not materialize as anticipated, the market price of the securities of a "special situation company" may decline significantly. Therefore, an investment in a Fund that invests a significant portion of its assets in these securities may involve a greater degree of risk than an investment in other mutual funds that seek long-term growth of capital by investing in better-known, larger companies. The adviser or subadviser of such a Fund believes, however, that if it analyzes "special situation companies" carefully and invests in the securities of these companies at the appropriate time, the Fund may achieve capital growth. There can be no assurance however, that a special situation that exists at the time the Fund makes its investment will be consummated under the terms and within the time period contemplated, if it is consummated at all.
FOREIGN SECURITIES
Investing in foreign securities (including through the use of depositary receipts) involves certain special considerations which typically are not associated with investing in United States securities. Since investments in foreign companies will frequently be denominated in the currencies of foreign countries (these securities are translated into U.S. dollars on a daily basis in order to value a Fund's shares), and since a Fund may hold securities and funds in foreign currencies, a Fund may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, if any, and may incur costs in connection with conversions between various currencies. Most foreign stock markets, while growing in volume of trading activity, have less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of comparable domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than in the United States and, at times, volatility of price can be greater than in the United States. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on United States exchanges, although each Fund endeavors to achieve the most favorable net
results on its portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers and listed companies in foreign countries than in the United States. In addition, with respect to certain foreign countries, there is the possibility of exchange control restrictions, expropriation or confiscatory taxation, and political, economic or social instability, which could affect investments in those countries. Expropriation of assets refers to the possibility that a country's laws will prohibit the return to the United States of any monies, which a Fund has invested in the country. Foreign securities, such as those purchased by a Fund, may be subject to foreign government taxes, higher custodian fees, higher brokerage costs and dividend collection fees which could reduce the yield on such securities.
Foreign economies may differ favorably or unfavorably from the U.S. economy in various respects, including growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency, and balance of payments positions. Many foreign securities are less liquid and their prices more volatile than comparable U.S. securities. From time to time, foreign securities may be difficult to liquidate rapidly without adverse price effects.
INVESTMENT IN COMPANIES IN DEVELOPING COUNTRIES. Investments may be made from time to time in companies in developing countries as well as in developed countries. Although there is no universally accepted definition, a developing country is generally considered to be a country which is in the initial stages of industrialization. Shareholders should be aware that investing in the equity and fixed income markets of developing countries involves exposure to unstable governments, economies based on only a few industries, and securities markets which trade a small number of securities. Securities markets of developing countries tend to be more volatile than the markets of developed countries; however, such markets have in the past provided the opportunity for higher rates of return to investors.
The value and liquidity of investments in developing countries may be affected favorably or unfavorably by political, economic, fiscal, regulatory or other developments in the particular countries or neighboring regions. The extent of economic development, political stability and market depth of different countries varies widely. Certain countries in the Asia region, including Cambodia, China, Laos, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are either comparatively underdeveloped or are in the process of becoming developed. Such investments typically involve greater potential for gain or loss than investments in securities of issuers in developed countries.
The securities markets in developing countries are substantially smaller, less liquid and more volatile than the major securities markets in the United States. A high proportion of the shares of many issuers may be held by a limited number of persons and financial institutions, which may limit the number of shares available for investment by a Fund. Similarly, volume and liquidity in the bond markets in developing countries are less than in the United States and, at times, price volatility can be greater than in the United States. A limited number of issuers in developing countries' securities markets may represent a disproportionately large percentage of market capitalization and trading volume. The limited liquidity of securities markets in developing countries may also affect the Fund's ability to acquire or dispose of securities at the price and time it wishes to do so. Accordingly, during periods of rising securities prices in the more illiquid securities markets, the Fund's ability to participate fully in such price increases may be limited by its investment policy of investing not more than 15% of its total net assets in illiquid securities. Conversely, the Fund's inability to dispose fully and promptly of positions in declining markets will cause the Fund's net asset value to decline as the value of the unsold positions is marked to lower prices. In addition, securities markets in developing countries are susceptible to being influenced by large investors trading significant blocks of securities.
Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of the United States. Certain of such countries have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks described above, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the value of the Fund's investments in those countries and the availability to the Fund of additional investments in those countries.
Economies of developing countries may differ favorably or unfavorably from the United States' economy in such respects as rate of growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. As export-driven economies, the economies of countries in the Asia Region are affected by developments in the economies of
their principal trading partners. Hong Kong, Japan and Taiwan have limited natural resources, resulting in dependence on foreign sources for certain raw materials and economic vulnerability to global fluctuations of price and supply.
Certain developing countries do not have comprehensive systems of laws, although substantial changes have occurred in many such countries in this regard in recent years. Laws regarding fiduciary duties of officers and directors and the protection of shareholders may not be well developed. Even where adequate law exists in such developing countries, it may be impossible to obtain swift and equitable enforcement of such law, or to obtain enforcement of the judgment by a court of another jurisdiction.
Trading in futures contracts on foreign commodity exchanges may be subject to the same or similar risks as trading in foreign securities.
DEPOSITARY RECEIPTS. A Fund may invest in foreign securities by purchasing depositary receipts, including American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or other securities convertible into securities of issuers based in foreign countries. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. Generally, ADRs, in registered form, are denominated in U.S. dollars and are designed for use in the U.S. securities markets, GDRs, in bearer form, are issued and designed for use outside the United States and EDRs (also referred to as Continental Depositary Receipts ("CDRs")), in bearer form, may be denominated in other currencies and are designed for use in European securities markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities. EDRs are European receipts evidencing a similar arrangement. GDRs are receipts typically issued by non-U.S. banks and trust companies that evidence ownership of either foreign or domestic securities. For purposes of a Fund's investment policies, ADRs, GDRs and EDRs are deemed to have the same classification as the underlying securities they represent. Thus, an ADR, GDR or EDR representing ownership of common stock will be treated as common stock.
A Fund may invest in depositary receipts through "sponsored" or "unsponsored" facilities. While ADRs issued under these two types of facilities are in some respects similar, there are distinctions between them relating to the rights and obligations of ADR holders and the practices of market participants.
A depositary may establish an unsponsored facility without participation by (or even necessarily the acquiescence of) the issuer of the deposited securities, although typically the depositary requests a letter of non-objection from such issuer prior to the establishment of the facility. Holders of unsponsored ADRs generally bear all the costs of such facilities. The depositary usually charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. dollars, the disposition of non-cash distributions, and the performance of other services. The depositary of an unsponsored facility frequently is under no obligation to pass through voting rights to ADR holders in respect of the deposited securities. In addition, an unsponsored facility is generally not obligated to distribute communications received from the issuer of the deposited securities or to disclose material information about such issuer in the U.S. and thus there may not be a correlation between such information and the market value of the depositary receipts. Unsponsored ADRs tend to be less liquid than sponsored ADRs.
Sponsored ADR facilities are created in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities enters into a deposit agreement with the depositary. The deposit agreement sets out the rights and responsibilities of the issuer, the depositary, and the ADR holders. With sponsored facilities, the issuer of the deposited securities generally will bear some of the costs relating to the facility (such as dividend payment fees of the depositary), although ADR holders continue to bear certain other costs (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositaries agree to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited securities.
FOREIGN SOVEREIGN DEBT. Certain Funds may invest in sovereign debt obligations issued by foreign governments. To the extent that a Fund invests in obligations issued by developing or emerging markets, these investments involve additional risks. Sovereign obligors in developing and emerging market countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. These obligors have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations
and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit for finance interest payments. Holders of certain foreign sovereign debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the foreign sovereign debt securities in which a Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit which may adversely affect the Fund's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants.
EQUITY LINKED NOTES. An equity-linked note is a note whose performance is tied to a single stock or a basket of stocks. Upon the maturity of the note, generally the holder receives a return of principal based on the capital appreciation of the underlying linked securities. The terms of an equity-linked note may also provide for the periodic interest payments to holders at either a fixed or floating rate. Equity-linked notes will be considered equity securities for purposes of a Fund's investment objective and strategies.
The price of an equity-linked note is derived from the value of the underlying linked securities. The level and type of risk involved in the purchase of an equity-linked note by a Fund is similar to the risk involved in the purchase of the underlying security or other emerging market securities. Such notes therefore may be considered to have speculative elements. However, equity-linked notes are also dependent on the individual credit of the issuer of the note, which may be a trust or other special purpose vehicle or finance subsidiary established by a major financial institution for the limited purpose of issuing the note. Like other structured products, equity-linked notes are frequently secured by collateral consisting of a combination of debt or related equity securities to which payments under the notes are linked. If so secured, the Fund would look to this underlying collateral for satisfaction of claims in the event that the issuer of an equity-linked note defaulted under the terms of the note.
Equity-linked notes are often privately placed and may not be rated, in which case a Fund will be more dependent on the ability of the Fund's adviser or subadviser to evaluate the creditworthiness of the issuer, the underlying security, any collateral features of the note, and the potential for loss due to market and other factors. Ratings of issuers of equity-linked notes refer only to the creditworthiness of the issuer and strength of related collateral arrangements or other credit supports, and do not take into account, or attempt to rate, any potential risks of the underlying linked securities. Depending upon the law of the jurisdiction in which an issuer is organized and the note is issued, in the event of default, the Fund may incur additional expenses in seeking recovery under an equity-linked note, and may have more limited methods of legal recourse in attempting to do so.
As with any investment, the Fund can lose the entire amount it has invested in an equity-linked note. The secondary market for equity-linked notes may be limited. The lack of a liquid secondary market may have an adverse effect on the ability of a Fund to accurately value the equity-linked note in its portfolio, and may make disposal of such securities more difficult for the Fund.
FOREIGN COMMERCIAL PAPER
A Fund may invest in commercial paper which is indexed to certain specific foreign currency exchange rates. The terms of such commercial paper provide that its principal amount is adjusted upwards or downwards (but not below zero) at maturity to reflect changes in the exchange rate between two currencies while the obligation is outstanding. A Fund will purchase such commercial paper with the currency in which it is denominated and, at maturity, will receive interest and principal payments thereon in that currency, but the amount or principal payable by the issuer at maturity will change in proportion to the change (if any) in the exchange rate between two specified currencies between the date the instrument is issued and the date the instrument matures. While such commercial paper entails the risk of loss of principal, the potential for realizing gains as a result of changes in foreign currency exchange rate enables a Fund to hedge or cross-hedge against a decline in the U.S. dollar value of investments denominated in foreign currencies while providing an attractive money market rate of return. A Fund will purchase such commercial paper for hedging purposes only, not for speculation. The Funds believe that such investments do not involve the creation of a senior security, but nevertheless will establish a segregated account with respect to its investments in this type of commercial paper and maintain in such account cash not available for investment or other liquid assets having a value equal to the aggregate principal amount of outstanding commercial paper of this type.
REAL ESTATE INVESTMENT TRUSTS
Although no Fund will invest in real estate directly, certain Funds may invest in securities of real estate investment trusts ("REITs") and other real estate industry companies or companies with substantial real estate investments and, as a result, such Fund may be subject to certain risks associated with direct ownership of real estate and with the real estate industry in general. These risks include, among others: possible declines in the value of real estate; possible lack of availability of mortgage funds; extended vacancies of properties; risks related to general and local economic conditions; overbuilding; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates.
REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs. REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Internal Revenue Code of 1986, as amended (the "Code").
CONVERTIBLE SECURITIES
Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into or exchanged for a specified amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. Convertible securities have general characteristics similar to both debt obligations and equity securities. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, the credit standing of the issuer and other factors. The market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. The conversion value of a convertible security is determined by the market price of the underlying common stock. The market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock and therefore will react to variations in the general market for equity securities. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer.
A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. Most convertible securities currently are issued by U.S. companies, although a substantial Eurodollar convertible securities market has developed, and the markets for convertible securities denominated in local currencies are increasing.
A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. If a convertible security held by a Fund is called for redemption, a Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock, or sell it to a third party.
Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, generally enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock of the same issuer. Because of the subordination feature, however, some convertible securities typically are rated below investment grade or are not rated, depending on the general creditworthiness of the issuer.
Certain Funds may also invest in zero coupon convertible securities. Zero coupon convertible securities are debt securities which are issued at a discount to their face amount and do not entitle the holder to any periodic payments of interest prior to maturity. Rather, interest earned on zero coupon convertible securities accretes at a stated yield until the security reaches its face amount at maturity. Zero coupon convertible securities are convertible into a specific number of shares of the issuer's common stock. In addition, zero coupon convertible securities usually have put features that provide the holder with the opportunity to sell the securities back to the issuer at a stated price before maturity. Generally, the prices of zero coupon convertible securities may be more sensitive to market interest rate fluctuations then conventional convertible securities. For more information about zero coupon securities generally, see "Zero Coupon Securities, Pay-In-Kind Bonds ("PIK Bonds") and Deferred Payment Securities" below.
WARRANTS
Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance), on a specified date, during a specified period, or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants acquired by a Fund in units or attached to securities are not subject to these restrictions. Warrants do not carry with them the right to dividends or voting rights with respect to the securities that they entitle their holder to purchase, and they do not represent any rights in the assets of the issuer. As a result, warrants may be considered more speculative than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date.
PREFERRED STOCK
Preferred stocks, like some debt obligations, are generally fixed-income securities. Shareholders of preferred stocks normally have the right to receive dividends at a fixed rate when and as declared by the issuer's board of directors, but do not participate in other amounts available for distribution by the issuing corporation. Dividends on the preferred stock may be cumulative, and all cumulative dividends usually must be paid prior to common shareholders of common stock receiving any dividends. Because preferred stock dividends must be paid before common stock dividends, preferred stocks generally entail less risk than common stocks. Upon liquidation, preferred stocks are entitled to a specified liquidation preference, which is generally the same as the par or stated value, and are senior in right of payment to common stock. Preferred stocks are, however, equity securities in the sense that they do not represent a liability of the issuer and, therefore, do not offer as great a degree of protection of capital or assurance of continued income as investments in corporate debt securities. Preferred stocks are generally subordinated in right of payment to all debt obligations and creditors of the issuer, and convertible preferred stocks may be subordinated to other preferred stock of the same issuer.
INTERESTS IN PUBLICLY TRADED LIMITED PARTNERSHIPS
Those Funds that invest in U.S. common stock may also invest in interests in publicly traded limited partnerships (limited partnership interests or units) which represent equity interests in the assets and earnings of the partnership's trade or business. Unlike common stock in a corporation, limited partnership interests have limited or no voting rights. However, many of the risks of investing in common stocks are still applicable to investments in limited partnership interests. In addition, limited partnership interests are subject to risks not present in common stock. For example, interest income generated from limited partnerships deemed not to be `publicly traded' will not be considered `qualifying income' under the Code and may trigger adverse tax consequences. Also, since publicly traded limited partnerships are a less common form of organizational structure than corporations, the limited partnership
units may be less liquid than publicly traded common stock. Also, because of the difference in organizational structure, the fair value of limited partnership units in a Fund's portfolio may be based either upon the current market price of such units, or if there is no current market price, upon the pro rata value of the underlying assets of the partnership. Limited partnership units also have the risk that the limited partnership might, under certain circumstances, be treated as a general partnership giving rise to broader liability exposure to the limited partners for activities of the partnership. Further, the general partners of a limited partnership may be able to significantly change the business or asset structure of a limited partnership without the limited partners having any ability to disapprove any such changes. In certain limited partnerships, limited partners may also be required to return distributions previously made in the event that excess distributions have been made by the partnership, or in the event that the general partners, or their affiliates, are entitled to indemnification.
SHORT SELLING OF SECURITIES
In a short sale of securities, a Fund sells stock which it does not own, making delivery with securities "borrowed" from a broker. The Fund is then obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. This price may or may not be less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay the lender any dividends or interest which accrue during the period of the loan. In order to borrow the security, the Fund may also have to pay a premium and/or interest which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. In addition, the broker may require the deposit of collateral (generally, up to 50% of the value of the securities sold short).
A Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. A Fund will realize a gain if the security declines in price between those two dates. The amount of any gain will be decreased and the amount of any loss will be increased by any premium or interest the Fund may be required to pay in connection with the short sale. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security. However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction. Whether a Fund will be successful in utilizing a short sale will depend, in part, on a Fund's adviser's or subadviser's ability to correctly predict whether the price of a security it borrows to sell short will decrease.
In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. A Fund must segregate or earmark an amount of cash or other liquid assets equal to the difference between (a) the market value of securities sold short at the time that they were sold short and (b) the value of the collateral deposited with the broker to meet margin requirements in connection with the short sale (not including the proceeds from the short sale). While the short position is open, the Fund must maintain on a daily basis segregated or earmarked liquid assets at such a level that the amount segregated or earmarked plus the amount of collateral deposited with the broker as margin equals the current market value of the securities sold short.
A Fund also may engage in short sales if at the time of the short sale the Fund owns or has the right to obtain without additional cost an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." The Funds do not intend to engage in short sales against the box for investment purposes. A Fund may, however, make a short sale as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund (or a security convertible or exchangeable for such security), or when the Fund wants to sell the security at an attractive current price. In such case, any future losses in the Fund's long position should be offset by a gain in the short position and, conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns. There will be certain additional transaction costs associated with short sales against the box. For tax purposes a Fund that enters into a short sale "against the box" may be treated as having made a constructive sale of an "appreciated financial position" causing the Fund to realize a gain (but not a loss).
RESTRICTED, NON-PUBLICLY TRADED AND ILLIQUID SECURITIES
A Fund may not invest more than 15% (10% for the Gartmore Money Market Fund) of its net assets, in the aggregate, in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits maturing in more than seven days and securities that are illiquid because of the absence of a readily available market or legal or contractual restrictions on resale or other factors limiting the marketability of the security. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Unless subsequently registered for sale, these securities can only be sold in privately negotiated transactions or pursuant to an exemption from registration. The Funds typically do not hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities, and a Fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A Fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
The SEC has adopted Rule 144A which allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers.
Any such restricted securities will be considered to be illiquid for purposes of a Fund's limitations on investments in illiquid securities unless, pursuant to procedures adopted by the Board of Trustees of the Trust, the Fund's adviser or subadviser has determined such securities to be liquid because such securities are eligible for resale pursuant to Rule 144A and are readily saleable. To the extent that qualified institutional buyers may become uninterested in purchasing Rule 144A securities, the Fund's level of illiquidity may increase.
Some Funds may sell over-the-counter ("OTC") options and, in connection therewith, segregate assets or cover its obligations with respect to OTC options written by the Fund. The assets used as cover for OTC options written by a Fund will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Fund may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC option written subject to this procedure would be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option.
The applicable adviser or subadviser will monitor the liquidity of restricted securities in the portion of a Fund it manages. In reaching liquidity decisions, the following factors are considered: (A) the unregistered nature of the security; (B) the frequency of trades and quotes for the security; (C) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (D) dealer undertakings to make a market in the security and (E) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer).
PRIVATE PLACEMENT COMMERCIAL PAPER. Commercial paper eligible for resale under Section 4(2) of the Securities Act is offered only to accredited investors. Rule 506 of Regulation D in the Securities Act lists investment companies as an accredited investor.
Section 4(2) paper not eligible for resale under Rule 144A under the Securities Act shall be deemed liquid if (1) the Section 4(2) paper is not traded flat or in default as to principal and interest; (2) the Section 4(2) paper is rated in one of the two highest rating categories by at least two NRSROs, or if only NRSRO rates the security, it is rated in one of the two highest categories by that NRSRO; and (3) the Fund's adviser or subadviser believes that, based on the trading markets for such security, such security can be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the security.
BORROWING
A Fund may borrow money from banks, limited by each Fund's fundamental investment restriction (generally, 33-1/3% of its total assets (including the amount borrowed)), including borrowings for temporary or emergency purposes. A Fund may engage in mortgage dollar roll and reverse repurchase agreements which may be considered a form of borrowing unless the Fund covers its exposure by segregating or earmarking liquid assets.
LEVERAGE. The use of leverage by a Fund creates an opportunity for greater total return, but, at the same time, creates special risks. For example, leveraging may exaggerate changes in the net asset value of Fund shares and in the yield on an Index Fund's portfolio. Although the principal of such borrowings will be fixed, a Fund's assets may change in value during the time the borrowings are outstanding. Borrowings will create interest expenses for the Fund which can exceed the income from the assets purchased with the borrowings. To the extent the income or capital appreciation derived from securities purchased with borrowed funds exceeds the interest a Fund will have to pay on the borrowings, the Fund's return will be greater than if leverage had not been used. Conversely, if the income or capital appreciation from the securities purchased with such borrowed funds is not sufficient to cover the cost of borrowing, the return to a Fund will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders as dividends and other distributions will be reduced. In the latter case, the applicable Fund's adviser or subadviser in its best judgment nevertheless may determine to maintain a Fund's leveraged position if it expects that the benefits to the Fund's shareholders of maintaining the leveraged position will outweigh the current reduced return.
Certain types of borrowings by a Fund may result in the Fund being subject to covenants in credit agreements relating to asset coverage, portfolio composition requirements and other matters. It is not anticipated that observance of such covenants would impede the Fund's adviser or subadviser from managing a Fund's portfolio in accordance with the Fund's investment objectives and policies. However, a breach of any such covenants not cured within the specified cure period may result in acceleration of outstanding indebtedness and require a Fund to dispose of portfolio investments at a time when it may be disadvantageous to do so.
An Index Fund at times may borrow from affiliates of BlackRock, provided that the terms of such borrowings are no less favorable than those available from comparable sources of funds in the marketplace.
DERIVATIVE INSTRUMENTS
A Fund's adviser or subadviser may use a variety of derivative instruments, including options, futures contracts (sometimes referred to as "futures"), options on futures contracts, stock index options, forward contracts, swaps and structured contracts, to hedge a Fund's portfolio, for risk management, for obtaining exposure to a particular security or group of securities without actually purchasing such security or group of securities, or for any other permissible purposes consistent with the Fund's investment objective. Derivative instruments are securities or agreements with their values based on the value of an underlying asset (e.g., a security, currency or index) or the level of a reference index.
Derivatives generally have investment characteristics that are based upon either forward contracts (under which one party is obligated to buy and the other party is obligated to sell an underlying asset at a specific price on a specified date) or option contracts (under which the holder of the option has the right but not the obligation to buy or sell an underlying asset at a specified price on or before a specified date). Consequently, the change in value of a forward-based derivative generally is roughly proportional to the change in value of the underlying asset. In contrast, the buyer of an option-based derivative generally will benefit from favorable movements in the price of the underlying asset but is not exposed to the corresponding losses that result from adverse movements in the value of the underlying asset. The seller (writer) of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses resulting from changes in the value of the underlying asset. Derivative transactions may include elements of leverage and, accordingly, the fluctuation of the value of the derivative transaction in relation to the underlying asset may be magnified.
The use of these instruments is subject to applicable regulations of the SEC, the several options and futures exchanges upon which they may be traded, and the Commodity Futures Trading Commission ("CFTC").
SPECIAL RISKS OF DERIVATIVE INSTRUMENTS. The use of derivative instruments involves special considerations and risks as described below. Risks pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon a Fund's adviser's or subadviser's ability to predict movements of the overall securities and currency markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation, between price movements of an instrument and price movements of investments being hedged. For example, if the value of an instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be fully successful. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. The effectiveness of hedges using instruments on indices will depend on the degree of correlation between price movements in the index and price movements in the investments being hedged, as well as, how similar the index is to the portion of the Fund's assets being hedged in terms of securities composition.
(3) Hedging strategies, if successful, can reduce the risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments. For example, if a Fund entered into a short hedge because a Fund's adviser or subadviser projected a decline in the price of a security in the Fund's portfolio, and the price of that security increased instead, the gain from that increase might be wholly or partially offset by a decline in the price of the instrument. Moreover, if the price of the instrument declines by more than the increase in the price of the security, a Fund could suffer a loss.
(4) As described below, a Fund might be required to maintain assets as "cover," maintain segregated accounts, or make margin payments when it takes positions in these instruments involving obligations to third parties (i.e., instruments other than purchased options). If the Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time. The Fund's ability to close out a position in an instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction ("counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any hedging position can be closed out at a time and price that is favorable to the Fund.
For a discussion of the federal income tax treatment of a Fund's derivative instruments, see "Additional General Tax Information For All Funds" below.
OPTIONS. A Fund may purchase or write put and call options on securities and indices, and may purchase options on foreign currencies, and enter into closing transactions with respect to such options to terminate an existing position. The purchase of call options serves as a long hedge, and the purchase of put options serves as a short hedge. Writing put or call options can enable a Fund to enhance income by reason of the premiums paid by the purchaser of such options. Writing call options serves as a limited short hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security appreciates to a price higher than the exercise price of the call option, it can be expected that the option will be exercised, and the Fund will be obligated to sell the security at less than its market value or will be obligated to purchase the security at a price greater than that at which the security must be sold under
the option. All or a portion of any assets used as cover for OTC options written by a Fund would be considered illiquid to the extent described under "Restricted, Non-Publicly Traded and Illiquid Securities" above. Writing put options serves as a limited long hedge because increases in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security depreciates to a price lower than the exercise price of the put option, it can be expected that the put option will be exercised, and the Fund will be obligated to purchase the security at more than its market value.
The value of an option position will reflect, among other things, the historical price volatility of the underlying investment, the current market value of the underlying investment, the time remaining until expiration of the option, the relationship of the exercise price to the market price of the underlying investment, and general market conditions. Options that expire unexercised have no value. Options used by a Fund may include European-style options, which can only be exercised at expiration. This is in contrast to American-style options which can be exercised at any time prior to the expiration date of the option.
A Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, a Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, a Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Fund to realize the profit or limit the loss on an option position prior to its exercise or expiration.
A Fund may purchase or write both OTC options and options traded on foreign and U.S. exchanges. Exchange-traded options are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded option transaction. OTC options are contracts between the Fund and the counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when the Fund purchases or writes an OTC option, it relies on the counter party to make or take delivery of the underlying investment upon exercise of the option. Failure by the counter party to do so would result in the loss of any premium paid by the Fund as well as the loss of any expected benefit of the transaction.
A Fund's ability to establish and close out positions in exchange-listed options depends on the existence of a liquid market. A Fund intends to purchase or write only those exchange-traded options for which there appears to be a liquid secondary market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. Although a Fund will enter into OTC options only with counterparties that are expected to be capable of entering into closing transactions with a Fund, there is no assurance that such Fund will in fact be able to close out an OTC option at a favorable price prior to expiration. In the event of insolvency of the counterparty, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
If a Fund is unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by a Fund could cause material losses because the Fund would be unable to sell the investment used as a cover for the written option until the option expires or is exercised.
A Fund may engage in options transactions on indices in much the same manner as the options on securities discussed above, except that index options may serve as a hedge against overall fluctuations in the securities markets in general.
The writing and purchasing of options is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Imperfect correlation between the options and securities markets may detract from the effectiveness of attempted hedging.
Transactions using OTC options (other than purchased options) expose a Fund to counterparty risk. To the extent required by SEC guidelines, a Fund will not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities, other options, or futures or (2) cash and liquid obligations with a value sufficient at all times to cover its potential obligations to the extent not covered as provided in (1) above. A Fund will also set aside cash and/or appropriate liquid assets in a segregated custodial
account if required to do so by the SEC and CFTC regulations. Assets used as cover or held in a segregated account cannot be sold while the position in the corresponding option or futures contract is open, unless they are replaced with similar assets. As a result, the commitment of a large portion of the Fund's assets to segregated accounts as a cover could impede portfolio management or the Fund's ability to meet redemption requests or other current obligations.
SPREAD TRANSACTIONS. A Fund may purchase covered spread options from securities dealers. Such covered spread options are not presently exchange-listed or exchange-traded. The purchase of a spread option gives a Fund the right to put, or sell, a security that it owns at a fixed dollar spread or fixed yield spread in relationship to another security that the Fund does not own, but which is used as a benchmark. The risk to a Fund in purchasing covered spread options is the cost of the premium paid for the spread option and any transaction costs. In addition, there is no assurance that closing transactions will be available. The purchase of spread options will be used to protect a Fund against adverse changes in prevailing credit quality spreads, i.e., the yield spread between high quality and lower quality securities. Such protection is only provided during the life of the spread option.
FUTURES CONTRACTS. Certain Funds may enter into futures contracts,
including interest rate, index, and currency futures and purchase and write
(sell) related options. The purchase of futures or call options thereon can
serve as a long hedge, and the sale of futures or the purchase of put options
thereon can serve as a short hedge. Writing covered call options on futures
contracts can serve as a limited short hedge, and writing covered put options on
futures contracts can serve as a limited long hedge, using a strategy similar to
that used for writing covered options in securities. A Fund's hedging may
include purchases of futures as an offset against the effect of expected
increases in securities prices or currency exchange rates and sales of futures
as an offset against the effect of expected declines in securities prices or
currency exchange rates. A Fund may write put options on futures contracts while
at the same time purchasing call options on the same futures contracts in order
to create synthetically a long futures contract position. Such options would
have the same strike prices and expiration dates. A Fund will engage in this
strategy only when a Fund's adviser or subadviser believes it is more
advantageous to a Fund than purchasing the futures contract.
To the extent required by regulatory authorities, a Fund will only enter into futures contracts that are traded on U.S. or foreign exchanges or boards of trade approved by the CFTC and are standardized as to maturity date and underlying financial instrument. These transactions may be entered into for "bona fide hedging" purposes as defined in CFTC regulations and other permissible purposes including increasing return and hedging against changes in the value of portfolio securities due to anticipated changes in interest rates, currency values and/or market conditions.
A Fund will not enter into futures contracts and related options for other than "bona fide hedging" purposes for which the aggregate initial margin and premiums required to establish positions exceed 5% of the Fund's net asset value after taking into account unrealized profits and unrealized losses on any such contracts it has entered into. There is no overall limit on the percentage of a Fund's assets that may be at risk with respect to futures activities. Although techniques other than sales and purchases of futures contracts could be used to reduce a Fund's exposure to market, currency, or interest rate fluctuations, such Fund may be able to hedge its exposure more effectively and perhaps at a lower cost through using futures contracts.
A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument (e.g., debt security) or currency for a specified price at a designated date, time, and place. An index futures contract is an agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified multiplier times the difference between the value of the index at the close of the last trading day of the contract and the price at which the index futures contract was originally written. Transaction costs are incurred when a futures contract is bought or sold and margin deposits must be maintained. A futures contract may be satisfied by delivery or purchase, as the case may be, of the instrument, the currency, or by payment of the change in the cash value of the index. More commonly, futures contracts are closed out prior to delivery by entering into an offsetting transaction in a matching futures contract. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of those securities is made. If the offsetting purchase price is less than the original sale price, a Fund realizes a gain; if it is more, a Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, a Fund realizes a gain; if it is less, a Fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If a Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain the margin deposits on the futures contract.
No price is paid by a Fund upon entering into a futures contract. Instead, at the inception of a futures contract, the Fund is required to deposit in a segregated account with its custodian, in the name of the futures broker through whom the transaction was effected, "initial margin" consisting of cash, U.S. government securities or other liquid obligations, in an amount generally equal to 10% or less of the contract value. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Unlike margin in securities transactions, initial margin on futures contracts does not represent a borrowing, but rather is in the nature of a performance bond or good-faith deposit that is returned to a Fund at the termination of the transaction if all contractual obligations have been satisfied. Under certain circumstances, such as periods of high volatility, a Fund may be required by an exchange to increase the level of its initial margin payment, and initial margin requirements might be increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures broker daily as the value of the futures position varies, a process known as "marking to market." Variation margin does not involve borrowing, but rather represents a daily settlement of a Fund's obligations to or from a futures broker. When a Fund purchases an option on a future, the premium paid plus transaction costs is all that is at risk. In contrast, when a Fund purchases or sells a futures contract or writes a call or put option thereon, it is subject to daily variation margin calls that could be substantial in the event of adverse price movements. If a Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous. Purchasers and sellers of futures positions and options on futures can enter into offsetting closing transactions by selling or purchasing, respectively, an instrument identical to the instrument held or written. Positions in futures and options on futures may be closed only on an exchange or board of trade on which they were entered into (or through a linked exchange). Although the Funds intend to enter into futures transactions only on exchanges or boards of trade where there appears to be an active market, there can be no assurance that such a market will exist for a particular contract at a particular time.
Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a future or option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.
If a Fund were unable to liquidate a futures or option on a futures contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses, because it would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the futures market might increase the risk that movements in the prices of futures contracts or options on futures contracts might not correlate perfectly with movements in the prices of the investments being hedged. For example, all participants in the futures and options on futures contracts markets are subject to daily variation margin calls and might be compelled to liquidate futures or options on futures contracts positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, because initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the future markets. This participation also might cause temporary price distortions. In addition, activities of large traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions.
COMMODITY FUTURES CONTRACTS. The Gartmore Nationwide Fund may invest in commodity futures, subject to the 5% limitation described above for all futures contracts. Commodity futures may be based upon commodities within five main commodity groups: (1) energy, which includes crude oil, natural gas, gasoline and heating oil; (2) livestock, which includes cattle and hogs; (3) agriculture, which includes wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4) industrial metals, which includes aluminum, copper, lead, nickel, tin and zinc; and (5) precious metals, which includes gold, platinum and silver. The Fund may purchase and sell commodity futures contracts, options on futures contracts and
options and futures on commodity indices with respect to these five main commodity groups and the individual commodities within each group, as well as other types of commodities.
RISKS ASSOCIATED WITH COMMODITY FUTURES CONTRACTS. There are several
additional risks associated with transactions in commodity futures contracts.
o Storage. Unlike the financial futures markets, in the commodity futures markets there are costs of physical storage associated with purchasing the underlying commodity. The price of the commodity futures contract will reflect the storage costs of purchasing the physical commodity, including the time value of money invested in the physical commodity. To the extent that the storage costs for an underlying commodity change while the Fund is invested in futures contracts on that commodity, the value of the futures contract may change proportionately.
o REINVESTMENT. In the commodity futures markets, producers of the underlying commodity may decide to hedge the price risk of selling the commodity by selling futures contracts today to lock in the price of the commodity at delivery tomorrow. In order to induce speculators to purchase the other side of the same futures contract, the commodity producer generally must sell the futures contract at a lower price than the expected future spot price. Conversely, if most hedgers in the futures market are purchasing futures contracts to hedge against a rise in prices, then speculators will only sell the other side of the futures contract at a higher futures price than the expected future spot price of the commodity. The changing nature of the hedgers and speculators in the commodity markets will influence whether futures prices are above or below the expected future spot price, which can have significant implications for the Fund. If the nature of hedgers and speculators in futures markets has shifted when it is time for the Fund to reinvest the proceeds of a maturing contract in a new futures contract, the Fund might reinvest at higher or lower futures prices, or choose to pursue other investments.
o OTHER ECONOMIC FACTORS. The commodities which underlie commodity futures contracts may be subject to additional economic and non-economic variables, such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political and regulatory developments. These factors may have a larger impact on commodity prices.
STRUCTURED PRODUCTS. A Fund may use structured products to hedge its portfolio. Structured products generally are individually negotiated agreements and may be traded over-the-counter. They are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments.
With respect to structured products, because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there is currently no active trading market for these securities. See also, "Description of Portfolio Instruments And Investment Policies -- Restricted, Non-Publicly Traded and Illiquid Securities."
SWAP AGREEMENTS. A Fund may enter into interest rate, securities index, commodity, or security and currency exchange rate swap agreements for any lawful purpose consistent with such Fund's investment objective, such as for the purpose of attempting to obtain or preserve a particular desired return or spread at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return or spread. A Fund also may enter into swaps in order to protect against an increase in the price of, or the currency exchange rate applicable to, securities that the Fund anticipates purchasing at a later date. Swap agreements are two-party contracts entered into
primarily by institutional investors for periods ranging from one or more days to several years. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Swap agreements may include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. "Total return swaps" are contracts in which one party agrees to make payments of the total return from the underlying asset during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another underlying asset.
The "notional amount" of the swap agreement is the agreed upon basis for calculating the obligations that the parties to a swap agreement have agreed to exchange. Under most swap agreements entered into by a Fund, the obligations of the parties would be exchanged on a "net basis." Consequently, a Fund's obligation (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). A Fund's obligation under a swap agreement will be accrued daily (offset against amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of cash or liquid assets.
Whether a Fund's use of swap agreements will be successful in furthering its investment objective will depend, in part, on a Fund's adviser's or subadviser's ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Swap agreements may be considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The swaps market is largely unregulated.
A Fund will enter swap agreements only with counterparties that a Fund's adviser or subadviser reasonably believes are capable of performing under the swap agreements. If there is a default by the other party to such a transaction, a Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction.
CREDIT DEFAULT SWAPS. A Fund may enter into credit default swap contracts. A Fund might use credit default swap contracts to limit or to reduce risk exposure of the Fund to defaults of corporate and sovereign issuers (i.e., to reduce risk when the Fund owns or has exposure to such issuers). A Fund also might use credit default swap contracts to create direct or synthetic short or long exposure to domestic or foreign corporate debt securities or certain sovereign debt securities to which the Fund is not otherwise exposed.
As the seller in a credit default swap contract, a Fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default (or similar event) by a third party, such as a U.S. or foreign issuer, on the debt obligation. In return, a Fund would receive from the counterparty a periodic stream of payments over the term of the contract, provided that no event of default (or similar event) occurs. If no event of default (or similar event) occurs, A Fund would keep the stream of payments and would have no payment of obligations. As the seller in a credit default swap contract, a Fund effectively would add economic leverage to its portfolio because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap.
As the purchaser in a credit default swap contract, a Fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment might expire worthless. It also would involve credit risk - that the seller may fail to satisfy its payment obligations to a Fund in the event of a default (or similar event). As the purchaser in a credit default swap contract, a Fund's investment would generate income only in the event of an actual default (or similar event) by the issuer of the underlying obligation.
FOREIGN CURRENCY-RELATED DERIVATIVE STRATEGIES - SPECIAL CONSIDERATIONS. A Fund may use options and futures and options on futures on foreign currencies and forward currency contracts to hedge against movements in the values of the foreign currencies in which a Fund's securities are denominated. A Fund may engage in currency exchange transactions to protect against uncertainty in the level of future exchange rates and may also engage in currency transactions to increase income and total return. Such currency hedges can protect against price movements in a security the Fund owns or intends to acquire that are attributable to changes in the value of the currency in which it is denominated. Such hedges do not, however, protect against price movements in the securities that are attributable to other causes.
A Fund might seek to hedge against changes in the value of a particular currency when no hedging instruments on that currency are available or such hedging instruments are more expensive than certain other hedging instruments. In such cases, a Fund may hedge against price movements in that currency by entering into transactions using hedging instruments on another foreign currency or a basket of currencies, the values of which a subadviser believes will have a high degree of positive correlation to the value of the currency being hedged. The risk that movements in the price of the hedging instrument will not correlate perfectly with movements in the price of the currency being hedged is magnified when this strategy is used.
The value of derivative instruments on foreign currencies depends on the value of the underlying currency relative to the U.S. dollar. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such hedging instruments, a Fund could be disadvantaged by having to deal in the odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies or any regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Quotation information generally is representative of very large transactions in the interbank market and thus might not reflect odd-lot transactions where rates might be less favorable. The interbank market in foreign currencies is a global, round-the-clock market. To the extent the U.S. options or futures markets are closed while the markets for the underlying currencies remain open, significant price and rate movements might take place in the underlying markets that cannot be reflected in the markets for the derivative instruments until they reopen.
Settlement of derivative transactions involving foreign currencies might be required to take place within the country issuing the underlying currency. Thus, a Fund might be required to accept or make delivery of the underlying foreign currency in accordance with any U.S. or foreign regulations regarding the maintenance of foreign banking arrangements by U.S. residents and might be required to pay any fees, taxes and charges associated with such delivery assessed in the issuing country.
Permissible foreign currency options will include options traded primarily in the OTC market. Although options on foreign currencies are traded primarily in the OTC market, a Fund will normally purchase OTC options on foreign currency only when a Fund's adviser or subadviser believes a liquid secondary market will exist for a particular option at any specific time.
FORWARD CURRENCY CONTRACTS
A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers.
At or before the maturity of a forward currency contract, a Fund may either sell a portfolio security and make delivery of the currency, or retain the security and fully or partially offset its contractual obligation to deliver the currency by purchasing a second contract. If a Fund retains the portfolio security and engages in an offsetting transaction, the Fund, at the time of execution of the offsetting transaction, will incur a gain or a loss to the extent that movement has occurred in forward currency contract prices.
The precise matching of forward currency contract amounts and the value of the securities involved generally will not be possible because the value of such securities, measured in the foreign currency, will change after the foreign currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign currencies are not covered by forward currency contracts. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain.
CURRENCY HEDGING. While the values of forward currency contracts, currency options, currency futures and options on futures may be expected to correlate with exchange rates, they will not reflect other factors that may affect the value of a Fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect a Fund against price decline if the issuer's creditworthiness deteriorates. Because the value of a Fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, a currency hedge may not be entirely successful in mitigating changes in the value of a Fund's investments denominated in that currency over time.
A decline in the dollar value of a foreign currency in which a Fund's securities are denominated will reduce the dollar value of the securities, even if their value in the foreign currency remains constant. The use of currency hedges does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In order to protect against such diminutions in the value of securities it holds, a Fund may purchase put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell the currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its securities that otherwise would have resulted. Conversely, if a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby potentially increasing the cost of the securities, a Fund may purchase call options on the particular currency. The purchase of these options could offset, at least partially, the effects of the adverse movements in exchange rates. Although currency hedges limit the risk of loss due to a decline in the value of a hedged currency, at the same time, they also limit any potential gain that might result should the value of the currency increase.
A Fund may enter into foreign currency exchange transactions to hedge its currency exposure in specific transactions or portfolio positions. Transaction hedging is the purchase or sale of forward currency with respect to specific receivables or payables of a Fund generally accruing in connection with the purchase or sale of its portfolio securities. Position hedging is the sale of forward currency with respect to portfolio security positions. A Fund may not position hedge to an extent greater than the aggregate market value (at the time of making such sale) of the hedged securities.
SECURITIES OF INVESTMENT COMPANIES
To the extent permitted by the 1940 Act, a Fund may generally invest up to 10% of its total assets, calculated at the time of investment, in the securities of other investment companies. No more than 5% of a Fund's total assets may be invested in the securities of any one investment company nor may it acquire more than 3% of the voting securities of any other investment company. However, as described above, each of the Investor Destinations Funds and the Optimal Allocations Funds may invest up to 100% of its assets in other investment companies. A Fund indirectly will bear its proportionate share of any management fees paid by an investment company in which it invests in addition to the advisory fee paid by the Fund. Some of the countries in which a Fund may invest may not permit direct investment by outside investors. Investments in such countries may only be permitted through foreign government-approved or government-authorized investment vehicles, which may include other investment companies.
SPDRS AND OTHER EXCHANGE TRADED FUNDS. A Fund may invest in Standard & Poor's Depositary Receipts ("SPDRs") and in shares of other exchange traded funds (collectively, "ETFs"). SPDRs are interests in unit investment trusts. Such investment trusts invest in a securities portfolio that includes substantially all of the common stocks (in substantially the same weights) as the common stocks included in a particular Standard & Poor's Index such as the S&P 500. SPDRs are traded on the American Stock Exchange, but may not be redeemed. The results of SPDRs will not match the performance of the designated S&P Index due to reductions in the SPDRs' performance attributable to transaction and other expenses, including fees paid by the SPDR to service providers. SPDRs distribute dividends on a quarterly basis.
ETF's, including SPDRs, are not actively managed. Rather, an ETF's objective is to track the performance of a specified index. Therefore, securities may be purchased, retained and sold by ETFs at times when an actively managed trust would not do so. As a result, you can expect greater risk of loss (and a correspondingly greater prospect of gain) from changes in the value of the securities that are heavily weighted in the index than would be the case if the ETF was not fully invested in such securities. Because of this, an ETF's price can be volatile, and a Fund may sustain sudden, and sometimes substantial, fluctuations in the value of its investment in such ETF.
FLOATING AND VARIABLE RATE INSTRUMENTS
Floating or variable rate obligations bear interest at rates that are not fixed, but vary with changes in specified market rates or indices, such as the prime rate, or at specified intervals. The interest rate on floating-rate securities varies with changes in the underlying index (such as the Treasury bill rate), while the interest rate on variable or adjustable rate securities changes at preset times based upon an underlying index. Certain of the floating or variable rate obligations that may be purchased by the Funds may carry a demand feature that would permit the holder to tender them back to the issuer of the instrument or to a third party at par value prior to maturity.
Some of the demand instruments purchased by a Fund may not be traded in a secondary market and derive their liquidity solely from the ability of the holder to demand repayment from the issuer or third party providing credit support. If a demand instrument is not traded in a secondary market, the Fund will nonetheless treat the instrument as "readily marketable" for the purposes of its investment restriction limiting investments in illiquid securities unless the demand feature has a notice period of more than seven days in which case the instrument will be characterized as "not readily marketable" and therefore illiquid.
Such obligations include variable rate master demand notes, which are unsecured instruments issued pursuant to an agreement between the issuer and the holder that permit the indebtedness thereunder to vary and to provide for periodic adjustments in the interest rate. A Fund will limit its purchases of floating and variable rate obligations to those of the same quality as it is otherwise allowed to purchase. A Fund's adviser or subadviser will monitor on an ongoing basis the ability of an issuer of a demand instrument to pay principal and interest on demand.
A Fund's right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Fund elects to demand payment and the date payment is due that may affect the ability of the issuer of the instrument or third party providing credit support to make payment when due, except when such demand instruments permit same day settlement. To facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than a Fund's custodian subject to a subcustodian agreement approved by the Fund between that bank and the Fund's custodian.
ZERO COUPON SECURITIES, PAY-IN-KIND BONDS ("PIK BONDS") AND DEFERRED PAYMENT SECURITIES
Zero coupon securities are debt securities that pay no cash income but are sold at substantial discounts from their value at maturity. When a zero coupon security is held to maturity, its entire return, which consists of the amortization of discount, comes from the difference between its purchase price and its maturity value. This difference is known at the time of purchase, so that investors holding zero coupon securities until maturity know at the time of their investment what the expected return on their investment will be. Zero coupon securities may have conversion features. PIK bonds pay all or a portion of their interest in the form of debt or equity securities. Deferred payment securities are securities that remain zero coupon securities until a predetermined date, at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals. Deferred payment securities are often sold at substantial discounts from their maturity value.
Zero coupon securities, PIK bonds and deferred payment securities tend to be subject to greater price fluctuations in response to changes in interest rates than are ordinary interest-paying debt securities with similar maturities. The value of zero coupon securities appreciates more during periods of declining interest rates and depreciates more during periods of rising interest rates than ordinary interest-paying debt securities with similar maturities. Zero coupon securities, PIK bonds and deferred payment securities may be issued by a wide variety of corporate and governmental issuers. Although these instruments are generally not traded on a national securities exchange, they are widely traded by brokers and dealers and, to such extent, will not be considered illiquid for the purposes of a Fund's limitation on investments in illiquid securities.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Loan Participations typically will result in a Fund having a contractual relationship only with the lender, not with the borrower. A Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Loan Participations, a Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and a Fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, a Fund will assume the credit risk of both the borrower and the lender that is selling the Participation. In the event of the insolvency of the lender selling a Participation, a Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. A Fund will acquire Loan Participations only if the lender interpositioned between the Fund and the borrower is determined by the applicable subadviser to be creditworthy. When a Fund purchases Assignments from lenders, the Fund will acquire direct rights against the borrower on the loan, except that under certain circumstances such rights may be more limited than those held by the assigning lender.
A Fund may have difficulty disposing of Assignments and Loan Participations. Because the market for such instruments is not highly liquid, the Fund anticipates that such instruments could be sold only to a limited number of institutional investors. The lack of a highly liquid secondary market may have an adverse impact on the value of such instruments and will have an adverse impact on the Fund's ability to dispose of particular Assignments or Loan Participations in response to a specific economic event, such as deterioration in the creditworthiness of the borrower.
In valuing a Loan Participation or Assignment held by a Fund for which a secondary trading market exists, the Fund will rely upon prices or quotations provided by banks, dealers or pricing services. To the extent a secondary trading market does not exist, the Fund's Loan Participations and Assignments will be valued in accordance with procedures adopted by the Board of Trustees, taking into consideration, among other factors: (i) the creditworthiness of the borrower under the loan and the lender; (ii) the current interest rate; period until next rate reset and maturity of the loan; (iii) recent prices in the market for similar loans; and (iv) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.
REVERSE REPURCHASE AGREEMENTS AND MORTGAGE DOLLAR ROLLS
A Fund may engage in reverse repurchase agreements to facilitate portfolio liquidity, a practice common in the mutual fund industry, or for arbitrage transactions discussed below. In a reverse repurchase agreement, a Fund would sell a security and enter into an agreement to repurchase the security at a specified future date and price. A Fund generally retains the right to interest and principal payments on the security. Since a Fund receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing (see "Borrowing"). When required by guidelines of the SEC, a Fund will segregate or earmark permissible liquid assets to secure its obligations to repurchase the security. At the time a Fund enters into a reverse repurchase agreement, it will establish and maintain segregated or earmarked liquid assets with an approved custodian having a value not less than the repurchase price (including accrued interest). The segregated or earmarked liquid assets will be marked-to-market daily and additional assets will be segregated or earmarked on any day in which the assets fall below the repurchase price (plus accrued interest). A Fund's liquidity and ability to manage its assets might be affected when it sets aside cash or portfolio securities to cover such commitments. Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale may decline below the price of the securities the Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities, and the Fund's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such determination. Reverse repurchase agreements are considered to be borrowings under the 1940 Act.
Mortgage dollar rolls are arrangements in which a Fund would sell mortgage-backed securities for delivery in the current month and simultaneously contract to purchase substantially similar securities on a specified future date. While a Fund would forego principal and interest paid on the mortgage-backed securities during the roll period, the Fund would be compensated by the difference between the current sales price and the lower price for the
future purchase as well as by any interest earned on the proceeds of the initial sale. A Fund also could be compensated through the receipt of fee income equivalent to a lower forward price. At the time the Fund would enter into a mortgage dollar roll, it would set aside permissible liquid assets in a segregated account to secure its obligation for the forward commitment to buy mortgage-backed securities. Depending on whether the segregated assets are cash equivalent or some other type of security, entering into mortgage dollar rolls may subject the Fund to additional interest rate sensitivity. If the segregated assets are cash equivalents that mature prior to the mortgage dollar roll settlement, there is little likelihood that the sensitivity will increase; however, if the segregated assets are subject to interest rate risk because they settle later, then the Fund's interest rate sensitivity could increase. Mortgage dollar roll transactions may be considered a borrowing by the Funds. (See "Borrowing")
Mortgage dollar rolls and reverse repurchase agreements may be used as arbitrage transactions in which a Fund will maintain an offsetting position in investment grade debt obligations or repurchase agreements that mature on or before the settlement date on the related mortgage dollar roll or reverse repurchase agreements. Since a Fund will receive interest on the securities or repurchase agreements in which it invests the transaction proceeds, such transactions may involve leverage. However, since such securities or repurchase agreements will be high quality and will mature on or before the settlement date of the mortgage dollar roll or reverse repurchase agreement, the Fund's adviser or subadviser believes that such arbitrage transactions do not present the risks to the Funds that are associated with other types of leverage.
THE NATIONWIDE CONTRACT
Each of the Investor Destinations Funds (except the Gartmore Investor Destinations Aggressive Fund) currently invests in the Nationwide Contract. The Nationwide Contract is a fixed interest contract issued and guaranteed by Nationwide Life Insurance Company ("Nationwide"). This contract has a stable principal value and will pay each such Fund a fixed rate of interest. The fixed interest rate must be at least 3.50% (on an annualized basis), but may be higher and is currently adjusted on a quarterly basis. Nationwide will calculate the interest rate in the same way that it calculates guaranteed interest rates for similar contracts. Because the contract is guaranteed by Nationwide, assuming no default, the Funds receive no more or less than the guaranteed amount and will not directly participate in the actual experience of the assets underlying the contract. Although under certain market conditions a Fund's performance may be hurt by its investment in the Nationwide Contract, Gartmore Mutual Fund Capital Trust ("GMFCT"), the investment adviser, believes that the relatively stable nature of the Nationwide Contract should reduce a Fund's volatility and overall risk, especially when the bond and stock markets decline simultaneously.
ADDITIONAL INFORMATION CONCERNING THE INDICES
RUSSELL 2000 INDEX. The Gartmore Small Cap Index Fund is not promoted, sponsored or endorsed by, not in any way affiliated with Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the Gartmore Small Cap Index Fund nor any associated literature or publications and Frank Russell Company makes no representation or warranty, express or implied, as to their accuracy, or completeness, or otherwise.
Frank Russell Company reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000(R) Index. Frank Russell Company has no obligation to take the needs of any particular fund or its participants or any other product or person into consideration in determining, composing or calculating the Index.
Frank Russell Company's publication of the Russell 2000(R) Index in no way suggests or implies an opinion by Frank Russell Company as to the attractiveness or appropriateness of investment in any or all securities upon which the Russell 2000 is based. Frank Russell Company makes no representation, warranty, or guarantee as to the accuracy, completeness, reliability, or otherwise of the Russell 2000 or any data included in the Russell 2000. Frank Russell Company makes no representation or warranty regarding the use, or the results of use, of the Russell 2000 or any data included therein, or any security (or combination thereof) comprising the Russell 2000. Frank Russell Company makes no other express or implied warranty, and expressly disclaims any warranty, or any kind, including, without means of limitation, any warranty of merchantability or fitness for a particular purpose with respect to the Russell 2000 or any data or any security (or combination thereof) included therein.
EAFE INDEX. The EAFE Index is the exclusive property of Morgan Stanley & Co. Incorporated ("Morgan Stanley"). The EAFE Index is a service mark of Morgan Stanley Group Inc.
The Gartmore International Index Fund is not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan Stanley makes no representation or warranty, express or implied, to the owners of shares of the Gartmore International Index Fund or any member of the public regarding the advisability of investing in securities generally or in the Gartmore International Index Fund particularly or the ability of the EAFE Index to track general stock market performance. Morgan Stanley is the licensor of certain trademarks, service marks and trade names of Morgan Stanley and of the EAFE Index. Morgan Stanley has no obligation to take the needs of the Gartmore International Index Fund or the owners of shares of the Gartmore International Index Fund into consideration in determining, composing or calculating the EAFE Index. Morgan Stanley is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of shares of the Gartmore International Index Fund to be issued or in the determination or calculation of the equation by which the shares of the Gartmore International Index Fund and are redeemable for cash. Morgan Stanley has no obligation or liability to owners of shares of the Gartmore International Index Fund in connection with the administration, marketing or trading of the Gartmore International Index Fund.
Although Morgan Stanley shall obtain information for inclusion in or for use in the calculation of the EAFE Index from sources which Morgan Stanley considers reliable, Morgan Stanley does not guarantee the accuracy and/or the completeness of the EAFE Index or any data included therein. Morgan Stanley makes no warranty, express or implied, as to results to be obtained by licensee, licensee's customers and counterparties, owners of shares of the International Index Fund, or any other person or entity from the use of the EAFE Index or any data included therein in connection with the rights licensed hereunder or for any other use. Morgan Stanley makes no express or implied warranties, and hereby expressly disclaims all warranties of merchantability or fitness for a particular purpose with respect to the EAFE Index or any data included therein. Without limiting any of the foregoing, in no event shall Morgan Stanley have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
S&P 500 INDEX AND S&P 400 INDEX. The Trust, on behalf of the Gartmore S&P 500 Index Fund and Gartmore Mid Cap Market Index Fund, has entered into a licensing agreement which authorizes the Funds to use the trademarks of the McGraw-Hill Companies, Inc.
Standard & Poor's 500(R), S&P 500(R), S&P(R), 500(R), Standard & Poor's MidCap 400(R), S&P MidCap 400(R), and S&P 400(R) are trademarks of The McGraw-Hill Companies, Inc. The Gartmore S&P 500 Index Fund and the Gartmore Mid Cap Index Fund are not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no representation or warranty, expressed or implied, to the shareholders of the Funds or any member of the public regarding the advisability of investing in securities generally or in the Funds particularly or the ability of the S&P 500 Index or the S&P 400 Index to track general stock market performance. S&P's only relationship to the Funds or the applicable adviser is the licensing of certain trademarks and trade names of S&P and of the S&P 500 and S&P 400 indices which are determined, composed and calculated by S&P without regard to the Funds. S&P has no obligation to take the needs of the Funds or their shareholders into consideration in determining, composing or calculating the S&P 500 and S&P 400 Indices. S&P is not responsible for or has not participated in the determination of the prices and amount of the Funds' shares or the timing of the issuance or sale of Fund shares or in the determination or calculation of the equation by which Fund shares are redeemed. S&P has no obligation or liability in connection with the administration, marketing or trading of the Funds. S&P does not guarantee the accuracy makes no warranty, expressed or implied as to the results to be obtained by the Funds, shareholders of the Funds, or any other person or entity from the use of the S&P 500 or S&P 400 Indices or any data included therein. Without limiting any of the foregoing, in no event shall S&P 500 and S&P 400 Indices have any liability for any special, punitive, indirect, or consequential damages, including lost profits even if notified of the possibility of such damages.
TEMPORARY INVESTMENTS
Generally each of the Funds will be fully invested in accordance with its investment objective and strategies. However, pending investment of cash balances or for other cash management purposes, or if a Fund's adviser (or subadviser) believes that business, economic, political or financial conditions warrant, a Fund (except the Gartmore Tax-Free Income Fund), may invest without limit in cash or money market cash equivalents, including: (1) short-term U.S. government securities; (2) certificates of deposit, bankers' acceptances, and interest-bearing savings deposits of commercial banks; (3) prime quality commercial paper; (4) repurchase agreements covering any of the securities in which the Fund may invest directly; and (5) subject to the limits of the 1940
Act, shares of other investment companies that invest in securities in which the Fund may invest. The Gartmore Tax-Free Income Fund may invest up to 20% of its assets in cash and the taxable money market cash equivalents listed above. Should this occur, a Fund will not be pursuing its investment objective and may miss potential market upswings.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the lesser of purchases and sales of portfolio securities for the year by the monthly average value of the portfolio securities, excluding securities whose maturities at the time of purchase were one year or less. The table below shows any significant variation in the Funds' portfolio turnover rate for the years ended October 31, 2006 and 2005, or any anticipated variation in the portfolio turnover rate from that reported for the last fiscal year:
--------------------------------------------------------- ---------- ----------- Fund(1) 2006 2005 --------------------------------------------------------- ---------- ----------- Gartmore Global Health Sciences Fund 268.38% 401.37% --------------------------------------------------------- ---------- ----------- Gartmore Global Technology and Communications Fund 368.77% 654.64% --------------------------------------------------------- ---------- ----------- Gartmore Global Utilities Fund 83.30% 401.37% --------------------------------------------------------- ---------- ----------- Gartmore Nationwide Fund 245.80% 145.66% --------------------------------------------------------- ---------- ----------- Gartmore Small Cap Value 194.61% -- --------------------------------------------------------- ---------- ----------- Gartmore Short Duration Bond Fund 28.68% 292.03% --------------------------------------------------------- ---------- ----------- ------------ |
1. The portfolio manager for each Fund is not limited by portfolio turnover in his management style, and the Fund's portfolio turnover will fluctuate based on particular market conditions and stock valuations.
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions of each Fund which cannot be changed without the vote of the majority of the outstanding shares of the Fund for which a change is proposed. The vote of the majority of the outstanding shares means the vote of (A) 67% or more of the voting securities present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy or (B) a majority of the outstanding voting securities, whichever is less.
Each of the Funds:
o May not (EXCEPT THE GARTMORE U.S. GROWTH LEADERS FUND, GARTMORE GLOBAL FINANCIAL SERVICES FUND, GARTMORE GLOBAL NATURAL RESOURCES FUND, GARTMORE GLOBAL UTILITIES FUND, GARTMORE NATIONWIDE LEADERS FUND, GARTMORE GLOBAL HEALTH SCIENCES FUND, GARTMORE WORLDWIDE LEADERS FUND, THE FUNDS OF FUNDS AND GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND) purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, if, immediately after such purchase, more than 5% of the Fund's total assets would be invested in such issuer or the Fund would hold more than 10% of the outstanding voting securities of the issuer, except that 25% or less of the Fund's total assets may be invested without regard to such limitations. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities. The Gartmore Money Market Fund will be deemed to be in compliance with this restriction so long as it is in compliance with Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time.
o May not borrow money or issue senior securities, except that each Fund may enter into reverse repurchase agreements and may otherwise borrow money and issue senior securities as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not act as an underwriter of another issuer's securities, except to the extent that the Fund may be deemed an underwriter within the meaning of the Securities Act in connection with the purchase and sale of portfolio securities.
o May not purchase or sell commodities or commodities contracts, except to the extent disclosed in the current Prospectus or Statement of Additional Information of the Fund.
o May not (EXCEPT THE GARTMORE VALUE OPPORTUNITIES FUND, GARTMORE U.S. GROWTH
LEADERS FUND, GARTMORE GLOBAL FINANCIAL SERVICES FUND, GARTMORE GLOBAL
NATURAL RESOURCES FUND, GARTMORE GLOBAL UTILITIES FUND, GARTMORE GLOBAL
HEALTH SCIENCES FUND, GARTMORE ENHANCED INCOME FUND, THE INDEX FUNDS
[EXCEPT THE GARTMORE S&P 500 INDEX FUND], GARTMORE GLOBAL TECHNOLOGY AND
COMMUNICATIONS FUND AND THE INVESTOR DESTINATIONS FUNDS) purchase the
securities of any issuer if, as a result, 25% or more (taken at current
value) of the Fund's total assets would be invested in the securities of
issuers, the principal activities of which are in the same industry. This
limitation does not apply to securities issued by the U.S. government or
its agencies or instrumentalities. The following industries are considered
separate industries for purposes of this investment restriction: electric,
natural gas distribution, natural gas pipeline, combined electric and
natural gas, and telephone utilities, captive borrowing conduit, equipment
finance, premium finance, leasing finance, consumer finance and other
finance. For the Gartmore Tax-Free Income Fund, this limitation does not
apply to obligations issued by state, county or municipal governments.
o May not lend any security or make any other loan, except that each Fund may in accordance with its investment objective and policies (i) lend portfolio securities, (ii) purchase and hold debt securities or other debt instruments, including but not limited to loan participations and subparticipations, assignments, and structured securities, (iii) make loans secured by mortgages on real property, (iv) enter into repurchase agreements, and (v) make time deposits with financial institutions and invest in instruments issued by financial institutions, and enter into any other lending arrangement as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not purchase or sell real estate, except that each Fund may (i) acquire real estate through ownership of securities or instruments and sell any real estate acquired thereby, (ii) purchase or sell instruments secured by real estate (including interests therein), and (iii) purchase or sell securities issued by entities or investment vehicles that own or deal in real estate (including interests therein).
THE GARTMORE S&P 500 INDEX FUND:
o May not purchase securities of one issuer, other than obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, if at the end of each fiscal quarter, (a) more than 5% of the Fund's total assets (taken at current value) would be invested in such issuer (except that up to 50% of the Fund's total assets may be invested without regard to such 5% limitation), and (b) more than 25% of its total assets (taken at current value) would be invested in securities of a single issuer. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.
THE INDEX FUNDS (EXCEPT THE GARTMORE S&P 500 INDEX FUND) AND THE INVESTOR DESTINATIONS FUNDS:
o May not purchase the securities of any issuer if, as a result, 25% or more than (taken at current value) of the Fund's total assets would be invested in the securities of issuers, the principal activities of which are in the
same industry; provided, that in replicating the weightings of a particular industry in its target index, a Fund may invest more than 25% of its total assets in securities of issuers in that industry.
THE OPTIMAL ALLOCATIONS FUNDS:
o May not invest more than 25% of the Fund's total assets in securities of issuers in any one industry (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities or securities of other investment companies).
THE GARTMORE VALUE OPPORTUNITIES FUND AND GARTMORE ENHANCED INCOME FUND:
o May not purchase the securities of any issuer if, as a result, 25% or more (taken at current value) of the Fund's total assets would be invested in the securities of issuers, the principal activities of which are in the same industry; provided, that in replicating the weightings of a particular industry in its target index, a Fund may invest more than 25% of its total assets in securities of issuers in that industry. This limitation does not apply to securities issued by the U.S. government or its agencies or instrumentalities and obligations issued by state, county or municipal governments. The following industries are considered separate industries for purposes of this investment restriction: electric, natural gas distribution, natural gas pipeline, combined electric and natural gas, and telephone utilities, captive borrowing conduit, equipment finance, premium finance, leasing finance, consumer finance and other finance.
CONCENTRATION POLICIES. EACH OF THE FOLLOWING FUNDS HAS A POLICY REGARDING CONCENTRATING ITS INVESTMENTS IN THE SECURITIES OF COMPANIES IN THE SAME OR RELATED INDUSTRIES AS DESCRIBED BELOW:
THE GARTMORE U.S. GROWTH LEADERS FUND:*
o Will invest 25% or more of its assets in a group of companies in software and related technology industries.
THE GARTMORE GLOBAL FINANCIAL SERVICES FUND:*
o Will invest 25% or more of its assets in at least one of the following industry groups: banks and savings and loan institutions and their holding companies, consumer and industrial finance companies, investment banks, insurance brokers, securities brokers and investment advisers, real estate-related companies, leasing companies, and insurance companies, such as property and casualty and life insurance holding companies.
THE GARTMORE GLOBAL UTILITIES FUND:*
o Will invest 25% or more of its assets in at least one of the following industry groups: energy sources; maintenance services; companies that provide infrastructure for utilities; cable television; radio; telecommunications services; transportation services; and water and sanitary services.
THE GARTMORE GLOBAL HEALTH SCIENCES FUND:*
o Will invest 25% or more of its assets in at least one of the following industry groups: health care; pharmaceuticals; biotechnology; medical supplies; medical services and medical devices.
THE GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND:
o Shall invest more than 25% of its total assets in the securities of issuers
in technology and/or communications industries. These industries include:
hardware and equipment; information technology; software; consulting and
services; consumer electronics; defense technology; broadcasting; and
communication equipment.
THE GARTMORE GLOBAL NATURAL RESOURCES FUND:
o Will invest more than 25% of its total assets in securities of issuers in natural resources industries. These industries include: integrated oil; oil and gas exploration and production; gold and other precious metals; steel and iron ore production; energy services and technology; base metal production; forest products; farming products; paper products; chemicals; building materials; coal; alternative energy sources; and environmental services.
* For purposes of calculation of this restriction, the Fund considers whether it has invested 25% or more of its total assets in the companies of the required industries.
THE FOLLOWING ARE THE NON-FUNDAMENTAL OPERATING POLICIES OF THE FUNDS WHICH MAY BE CHANGED BY THE BOARD OF TRUSTEES OF THE TRUST WITHOUT SHAREHOLDER APPROVAL:
Each Fund may not:
o Sell securities short (except for the Gartmore U.S. Growth Leaders Long-Short Fund, Gartmore Mid Cap Growth Leaders Fund, and Gartmore U.S. Growth Leaders Fund), unless the Fund owns or has the right to obtain securities equivalent in kind and amount to the securities sold short or unless it covers such short sales as required by the current rules and positions of the SEC or its staff, and provided that short positions in forward currency contracts, options, futures contracts, options on futures contracts, or other derivative instruments are not deemed to constitute selling securities short. The Gartmore U.S. Growth Leaders Fund may only sell securities short in accordance with the description contained in its Prospectus or in this SAI.
o Purchase securities on margin, except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with options, futures contracts, options on futures contracts, transactions in currencies or other derivative instruments shall not constitute purchasing securities on margin.
o Purchase or otherwise acquire any security if, as a result, more than 15% (10% with respect to the Gartmore Money Market Fund) of its net assets would be invested in securities that are illiquid.
o Pledge, mortgage or hypothecate any assets owned by the Fund (except for the Gartmore U.S. Growth Leaders Long-Short Fund) in excess of 33 1/3% of the Fund's total assets at the time of such pledging, mortgaging or hypothecating.
If any percentage restriction or requirement described above is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in net asset value will not constitute a violation of such restriction or requirement. However, should a change in net asset value or other external events cause a Fund's investments in illiquid securities including repurchase agreements with maturities in excess of seven days, to exceed the limit set forth above for such Fund's investment in illiquid securities, a Fund will act to cause the aggregate amount such securities to come within such limit as soon as reasonably practicable. In such event, however, such Fund would not be required to liquidate any portfolio securities where a Fund would suffer a loss on the sale of such securities.
EACH FUND, EXCEPT THE INDEX FUNDS AND THE FUNDS OF FUNDS, MAY NOT:
o Purchase securities of other investment companies except (a) in connection with a merger, consolidation, acquisition, reorganization or offer of exchange, or (b) to the extent permitted by the 1940 Act or any rules or regulations thereunder or pursuant to any exemptions therefrom.
In addition to the investment restrictions above, each Fund must be diversified according to Internal Revenue Code requirements. Specifically, at each tax quarter end, each Fund's holdings must be diversified so that (a) at least 50% of the market value of its total assets is represented by cash, cash
items (including receivables), U.S. government securities, securities of other U.S. regulated investment companies, and other securities, limited so that no one issuer has a value greater than 5% of the value of the Fund's total assets and that the Fund holds no more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of the Fund's assets is invested in the securities (other than those of the U.S. government or other U.S. regulated investment companies) of any one issuer or of two or more issuers which the Fund controls and which are engaged in the same, similar, or related trades or businesses.
DISCLOSURE OF PORTFOLIO HOLDINGS
The Board of Trustees of the Trust has adopted policies and procedures regarding the disclosure of portfolio holdings information to protect the interests of Fund shareholders and to address potential conflicts of interest that could arise between the interests of Fund shareholders and the interests of the Funds' investment advisers, principal underwriter or affiliated persons of the Funds' investment advisers or principal underwriter. The Trust's overall policy with respect to the release of portfolio holdings is to release such information consistent with applicable legal requirements and the fiduciary duties owed to shareholders. Subject to the limited exceptions described below, the Trust will not make available to anyone non-public information with respect to its portfolio holdings until such time as the information is made available to all shareholders or the general public.
The policies and procedures are applicable to the Funds' respective investment advisers and any subadviser to the Funds. Pursuant to the policy, the Funds, their investment advisers, any subadviser, and their agents are obligated to:
o Act in the best interests of Fund shareholders by protecting
non-public and potentially material portfolio holdings
information;
o Ensure that portfolio holdings information is not provided to a
favored group of clients or potential clients; and
o Adopt such safeguards and controls around the release of client
information so that no client or group of clients is unfairly
disadvantaged as a result of such release.
Portfolio holdings information that is not publicly available will be released selectively only pursuant to the exceptions described below. In most cases, where an exception applies, the release of portfolio holdings is strictly prohibited until the information is at least 15 calendar days old. Nevertheless, GMFCT's Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate may authorize, where circumstances dictate, the release of more current portfolio holdings information.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC.The Funds disclose their complete portfolio holdings information to the SEC using Form N-Q within 60 days of the end of the first and third quarter ends of the Funds' fiscal year and on Form N-CSR on the second and fourth quarter ends of the Funds' fiscal year. Form N-Q is not required to be mailed to shareholders, but is made public through the SEC's electronic filings. Shareholders receive either complete portfolio holdings information or summaries of Fund portfolio holdings with their annual and semi-annual reports.
Exceptions to the portfolio holdings release policy described above can only be authorized by GMFCT's Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate and will be made only when:
o A Fund has a legitimate business purpose for releasing portfolio
holdings information in advance of release to all shareholders or
the general public;
o The recipient of the information provides written assurances that
the non-public portfolio holdings information will remain
confidential and that persons with access to the information will
be prohibited from trading based on the information; and
o The release of such information would not otherwise violate the
antifraud provisions of the federal securities laws or the Funds'
fiduciary duties.
Under this policy, the receipt of compensation by a Fund, an investment adviser, a subadviser, or an affiliate as consideration for disclosing non-public portfolio holdings information will not be deemed a legitimate business purpose.
Eligible third parties to whom portfolio holdings information may be released in advance of general release include the following:
o Data consolidators (including ratings agencies);
o Fund rating/ranking services and other data providers; and
o Service providers to the Funds.
The Funds' investment advisers conduct periodic reviews of compliance with the policy and the Funds' Chief Compliance Officer provides annually a report to the Board of Trustees regarding the operation of the policy and any material changes recommended as a result of such review. The investment advisers' compliance staff will also annually submit to the Board a list of exceptions granted to the policy, including an explanation of the legitimate business purpose of the Fund that was served as a result of the exception.
TRUSTEES AND OFFICERS OF THE TRUST
MANAGEMENT INFORMATION
Trustees who are not Interested Persons (as defined in the 1940 Act) of the Trust.
=============================================================================================================
(1) (2) (3) (4) (5)
=============================================================================================================
NAME, ADDRESS, AND POSITION(S) HELD PRINCIPAL OCCUPATION(S) NUMBER OF OTHER DIRECTORSHIPS
YEAR OF BIRTH WITH FUND AND DURING PAST 5 YEARS PORTFOLIOS IN HELD BY TRUSTEE**
LENGTH OF TIME FUND COMPLEX
SERVED* OVERSEEN BY
TRUSTEE
=============================================================================================================
Charles E. Allen Trustee since Mr. Allen is Chairman, Chief 89 None
July 2000 Executive Officer and
c/o NWD Investment President of Graimark Realty
Management, Inc. Advisors, Inc. (real estate
. development, investment and
1200 River Road, asset management).
Suite 1000,
Conshohocken, PA 19428
1948
=============================================================================================================
Paula H.J. Cholmondeley Trustee since Ms. Cholmondeley was Vice 89 Director of Dentsply
July 2000 President and General International, Inc.
c/o NWD Investment Manager Sappi Fine Paper (dental products),
Management, Inc. North America from April Ultralife Batteries,
1200 River Road, 2000 through December 2003. Inc., Albany
Suite 1000, International Corp.
Conshohocken, PA 19428 (paper industry),
Terex Corporation
1947 (construction
equipment), and
Minerals Technology
Inc. (specialty
chemicals)
=============================================================================================================
C. Brent DeVore*** Trustee since Dr. DeVore is President of 89 None
1990 Otterbein College.
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1940
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|
=============================================================================================================
(1) (2) (3) (4) (5)
=============================================================================================================
NAME, ADDRESS, AND POSITION(S) HELD PRINCIPAL OCCUPATION(S) NUMBER OF OTHER DIRECTORSHIPS
YEAR OF BIRTH WITH FUND AND DURING PAST 5 YEARS PORTFOLIOS IN HELD BY TRUSTEE**
LENGTH OF TIME FUND COMPLEX
SERVED* OVERSEEN BY
TRUSTEE
=============================================================================================================
Phyllis Kay Dryden Trustee since Ms. Dryden was a partner of 89 None
December 2004 Mitchell Madison, a
c/o NWD Investment management consulting
Management, Inc. company from January 2006
1200 River Road, until December 2006; she is
Suite 1000, currently a consultant with
Conshohocken, PA 19428 the company. Ms. Dryden was
formerly Managing Partner of
1947 marchFIRST, a global
management consulting firm.
=============================================================================================================
Barbara L. Hennigar Trustee since Retired. 89 None
July 2000
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1935
=============================================================================================================
Barbara I. Jacobs Trustee since Ms. Jacobs served as 89 None
December 2004 Chairman of the Board of
c/o NWD Investment Directors of KICAP Network
Management, Inc. Fund, a European (United
1200 River Road, Kingdom) hedge fund, from
Suite 1000, January 2001 to January
Conshohocken, PA 19428 2006. From 1988-2003, Ms.
Jacobs was also a Managing
1950 Director and European
Portfolio Manager of CREF
Investments (Teachers
Insurance and Annuity
Association -- College
Retirement Equities Fund).
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|
=============================================================================================================
(1) (2) (3) (4) (5)
=============================================================================================================
NAME, ADDRESS, AND POSITION(S) HELD PRINCIPAL OCCUPATION(S) NUMBER OF OTHER DIRECTORSHIPS
YEAR OF BIRTH WITH FUND AND DURING PAST 5 YEARS PORTFOLIOS IN HELD BY TRUSTEE**
LENGTH OF TIME FUND COMPLEX
SERVED* OVERSEEN BY
TRUSTEE
=============================================================================================================
Douglas F. Kridler Trustee since Mr. Kridler has served as 89 None
September 1997 the President and Chief
c/o NWD Investment Executive Officer of the
Management, Inc. Columbus Foundation, (a
1200 River Road, Columbus, OH-based
Suite 1000, foundation which manages
Conshohocken, PA 19428 over 1,300 individual
endowment funds) since
1955 February 2002. Prior to
January 31, 2002, Mr.
Kridler was the President of
the Columbus Association for
the Performing Arts and
Chairman of the Greater
Columbus Convention and
Visitors Bureau.
=============================================================================================================
Michael D. McCarthy Trustee since Retired. Mr. McCarthy was 89 None
December 2004 Chairman of VMAC (Commodity
c/o NWD Investment Swaps) from October 2002
Management, Inc. until January 2007, and a
1200 River Road, partner of Pineville
Suite 1000, Properties LLC (a commercial
Conshohocken, PA 19428 real estate development
firm) from September 2000
1947 until January 2007.
=============================================================================================================
David C. Wetmore Trustee since Retired. 89 None
1995
c/o NWD Investment and Chairman
Management, Inc. since February
1200 River Road, 2005
Suite 1000,
Conshohocken, PA 19428
1948
=============================================================================================================
|
* Length of time served includes time served with the Trust's predecessors
** Directorships held in (1) any other investment companies registered under
the 1940 Act, (2) any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or (3) any company subject to the requirements of
Section 15(d) of the Exchange Act.
*** Mr. DeVore has served as President of Otterbein College since 1984. Mark
Thresher, President and Chief Operating Officer of Nationwide Financial
Services, Inc. ("NFS") has served as a member of the Board of Trustees of
Otterbein College since 2000, currently serving as one of 30 of its
trustees, and is currently one of two Vice Chairmen of the Board. NFS is
under common control with each of the companies that serves as an
investment adviser or principal underwriter to the Trust, as each is a
majority-owned subsidiary of Nationwide Corporation ("NC") and, through NC,
of Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire
Insurance Company (4.8%).
TRUSTEES WHO ARE INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) AND OFFICERS OF THE FUNDS
=============================================================================================================
(1) (2) (3) (4) (5)
=============================================================================================================
NAME, ADDRESS, AND POSITION(S) HELD PRINCIPAL OCCUPATION(S) NUMBER OF OTHER DIRECTORSHIPS
YEAR OF BIRTH WITH FUND AND DURING PAST 5 YEARS PORTFOLIOS IN HELD BY TRUSTEE(3)
LENGTH OF TIME FUND COMPLEX
SERVED(1) OVERSEEN BY
TRUSTEE
=============================================================================================================
Arden L. Shisler Trustee since Retired; Mr. Shisler is the 89 Director of
February 2000 former President and Chief Nationwide Financial
NWD Investment Management, Executive Officer of KeB Services, Inc. (2)
Inc. Transport, Inc., a trucking
1200 River Road, firm (2000 through 2002). He
Suite 1000, served as a consultant to KeB
Conshohocken, PA 19428 from January 2003 through
December 2004. Since 1992, Mr.
1941 Shisler has also been Chairman
of the Board for Nationwide
Mutual Insurance Company(2).
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(1) (2) (3) (4) (5)
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NAME, ADDRESS, AND POSITION(S) HELD PRINCIPAL OCCUPATION(S) NUMBER OF OTHER DIRECTORSHIPS
YEAR OF BIRTH WITH FUND AND DURING PAST 5 YEARS PORTFOLIOS IN HELD BY TRUSTEE(3)
LENGTH OF TIME FUND COMPLEX
SERVED(1) OVERSEEN BY
TRUSTEE
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John H. Grady President and Mr. Grady is President and 89 None
Chief Chief Executive Officer of NWD
NWD Investment Executive Investment Group, the asset
Management, Inc. Officer management operations of
1200 River Road, since Nationwide Mutual Insurance
Suite 1000, December 2006 Company, which includes
Conshohocken, PA 19428 Gartmore Mutual Fund Capital
Trust, (2) Gartmore Morley
Capital Management, Inc.,
(2)NorthPointe Capital LLC,
1961 (2) Gartmore SA Capital Trust,
(2) Gartmore Investor
Services, Inc. (2) and
Gartmore Distribution
Services, Inc. 2 From March
2004 until March 2006, Mr.
Grady was Chief Executive
Officer of Constellation
Investment Management Co., L.P
(registered investment
adviser), and President and
Chief Executive Officer of
Constellation Funds Group
(registered investment
companies). He also was
President of Constellation
Investment Distribution Co.,
Inc. (registered
broker-dealer) from March 2004
until June 2006. From February
2001 until February 2004, Mr.
Grady was Chief Operating and
Chief Legal Officer; Managing
Director, Mutual Funds Group,
Turner Investment Partners,
Inc. (registered investment
adviser); Executive Vice
President of Turner Funds and
Turner Institutional
Portfolios (registered
investment companies); and
President, Turner Investment
Distributors, Inc. (registered
broker-dealer).
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(1) (2) (3) (4) (5)
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NAME, ADDRESS, AND POSITION(S) HELD PRINCIPAL OCCUPATION(S) NUMBER OF OTHER DIRECTORSHIPS
YEAR OF BIRTH WITH FUND AND DURING PAST 5 YEARS PORTFOLIOS IN HELD BY TRUSTEE(3)
LENGTH OF TIME FUND COMPLEX
SERVED(1) OVERSEEN BY
TRUSTEE
=============================================================================================================
Gerald J. Holland Treasurer Mr. Holland is Senior Vice N/A None
since March President - Operations for NWD
NWD Investment 2001 Investment Management, Inc.
Management, Inc. ("NWD")(2).
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1951
==============================================================================================================
Michael A. Krulikowski Chief Since November 1999, Mr. N/A None
Compliance Krulikowski has served as a
NWD Investment Officer since Vice President and Chief
Management, Inc. June 2004 Compliance Officer of NWD. (3)
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1959
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Eric E. Miller Secretary Mr. Miller is Senior Vice N/A None
since President, General Counsel,
NWD Investment December 2002 and Assistant Secretary for
Management, Inc. NWD (3) .
1200 River Road
Suite 1000,
Conshohocken, PA 19428
1953
==============================================================================================================
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(1) Length of time served includes time served with the Trust's predecessors.
(2) This position is held with an affiliated person or principal underwriter of the Funds.
(3) Directorships held in: (1) any other investment company registered under the
1940 Act, (2) any company with a class of securities registered pursuant to
Section 12 of the Exchange Act or (3) any company subject to the
requirements of Section 15(d) of the Exchange Act.
RESPONSIBILITIES OF THE BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of its Board of Trustees. The Board of Trustees sets and reviews policies regarding the operation of the Trust, and directs the officers to perform the daily functions of the Trust.
BOARD OF TRUSTEES COMMITTEES
The Board of Trustees has four standing committees: Audit, Valuation and Operations, Nominating and Fund Governance and Performance Committees.
The purposes of the Audit Committee are to: (a) oversee the Trust's
accounting and financial reporting policies and practices, its internal controls
and, as appropriate, the internal controls of certain of its service providers;
(b) oversee the quality and objectivity of the Trust's financial statements and
the independent audit thereof; (c) ascertain the independence of the Trust's
independent auditors; (d) act as a liaison between the Trust's independent
auditors and the Board; (e) approve the engagement of the Trust's independent
auditors to (i) render audit and non-audit services for the Trust and (ii)
render non-audit services for the Trust's investment advisers (other than a
subadviser whose role is primarily portfolio management and is overseen by
another investment adviser) and certain other entities under common control with
one of the Trust's investment advisers if the engagement relates to the Trust's
operations and financial reporting; (f) meet and consider the reports of the
Trust's independent auditors; (g) review and make recommendations to the Board
regarding the CODE OF ETHICS of the Trust and that of all Trust advisers,
subadvisers, and principal underwriters and annually review changes to,
violations of, and certifications with respect to such CODE OF ETHICS; and (h)
oversee the Trust's written policies and procedures adopted under Rule 38a-1 of
the 1940 Act and oversee the appointment and performance of the Trust's
designated Chief Compliance Officer. The function of the Audit Committee is
oversight; it is management's responsibility to maintain appropriate systems for
accounting and internal control, and the independent auditors' responsibility to
plan and carry out a proper audit. The independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of the
Trust's shareholders. Each of the members have a working knowledge of basic
finance and accounting matters and are not interested persons of the Trust, as
defined in the 1940 Act. This Committee met six times during the past fiscal
year and currently consists of the following Trustees: Mr. Allen, Ms.
Cholmondeley (Chairperson), Ms. Jacobs and Mr. Wetmore.
The purposes of the Valuation and Operations Committee are to (a) oversee the
implementation and operation of the Trust's Valuation Procedures, applicable to
all of the Trust's portfolio securities; (b) oversee the implementation and
operation of the Trust's Rule 2a-7 Procedures, applicable to the Trust's money
market fund series; (c) oversee the Trust's portfolio brokerage practices; and
(d) oversee distribution of the Trust's shares of beneficial interest. The
Valuation and Operations Committee met five times during the past fiscal year
and currently consists of the following Trustees: Mr. DeVore, Ms. Dryden, Ms.
Hennigar, Mr. Kridler (Chairman), and Mr. McCarthy, each of whom is not an
interested person of the Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has the following powers
and responsibilities: (1) selection and nomination of all persons for election
or appointment as Trustees of the Trust (provided that nominees for independent
Trustee are recommended for selection and approval by all of the incumbent
independent Trustees then serving on the Board); (2) periodic review of the
composition of the Board to determine whether it may be appropriate to add
individuals with specific backgrounds, diversity or skill sets; (3) periodic
review of Board governance procedures (including the Board's effectiveness,
Trustee retirement, Trustee investment in the Funds and the process by which the
Trust's principal service providers are evaluated); (4) review of completed
Trustee and Officer Questionnaires and adjust composition of the Board by
recommending the removal, replacement, or retirement of an incumbent Trustee and
may recommend the selection and nomination of an appropriate candidate; (5)
oversee the implementation of the Board's policies regarding evaluations of the
Board and Trustee peer evaluations; (6) review and make recommendations to the
Board regarding the PROXY VOTING GUIDELINES, POLICIES AND PROCEDURES of all
Trust advisers and subadvisers; (7) periodic review of Trustee compensation and
recommend appropriate changes to the Independent Trustees; (8) oversee
implementation of the Trust's POLICY REGARDING THE SERVICE BY TRUSTEES ON THE
BOARDS OF DIRECTORS OF PUBLIC COMPANIES AND UNAFFILIATED FUND COMPANIES; (9)
annual review and make recommendations to the Board regarding the BOARD'S
STATEMENTS OF POLICIES REGARDING THE ENHANCED FUND GOVERNANCE AND OVERSIGHT BY,
THE ENHANCED INDEPENDENCE OF, & the Enhanced Effectiveness of the Board of
Trustees; and (10) monitoring of the performance of legal counsel employed by
the independent Trustees, supervision of counsel for the independent Trustees
and monitoring of the performance of legal counsel to the Trust, in consultation
with the Trust's management. The Nominating and Fund Governance Committee
reports to the full Board with recommendations of any appropriate changes to the
Board. This Committee met seven times during the past fiscal year and currently
consists of the following Trustees: Mr. DeVore (Chairman), Ms. Cholmondeley, Ms.
Dryden, Mr. Kridler, and Mr. Wetmore, each of whom is not an interested person
of the Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has adopted procedures regarding its review of recommendations for trustee nominees, including those recommendations presented by shareholders. When considering whether to add additional or substitute Trustees to the Board of Trustees of the Trust, the
Trustees shall take into account any proposals for candidates that are properly submitted to the Trust's Secretary. Shareholders wishing to present one or more candidates for Trustee for consideration may do so by submitting a signed written request to the Trust's Secretary at attn: Secretary, Gartmore Mutual Funds, 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, which includes the following information: (i) name and address of shareholder and, if applicable, name of broker or record holder; (ii) number of shares owned; (iii) name of Fund(s) in which shares are owned; (iv) whether the proposed candidate(s) consent to being identified in any proxy statement utilized in connection with the election of Trustees; (v) the name and background information of the proposed candidates and (vi) a representation that the candidate or candidates are willing to provide additional information about themselves, including assurances as to their independence.
The functions of the Performance Committee are: (1) in consultation
with management of the Trust, to review the kind, scope and format of, and the
time periods covered by, the investment performance data and related reports
provided to the Board and, if the Committee determines that changes to such data
or reports would be appropriate and practicable, the Committee will work with
management of the Trust to implement any such changes; (2) in consultation with
management of the Trust, to review the investment performance benchmarks and
peer groups used in reports delivered to the Board for comparison of investment
performance of the Funds and, if the Committee determines that changes to such
benchmarks or peer groups would be appropriate, the Committee will work with
management to implement any such change; (3) in consultation with management of
the Trust, to review such other matters that affect performance, including for
example, fee structures, expense ratios, as the Committee deems to be necessary
and appropriate and work with management to implement any recommended changes;
(4) to review and monitor the performance of the Trust's funds and the fund
family, as a whole, in the manner and to the extent directed by the Board of
Trustees, recognizing that the ultimate oversight of fund performance shall
remain with the full Board of Trustees; (5) to review and monitor the structure
of, and the method used to determine, the compensation of each portfolio manager
of the Trust's funds with respect to management of the Trust's funds and any
other account managed by the portfolio manager; and (6) to review and monitor
material conflicts of interest that may arise from a portfolio manager's
management of multiple accounts.. This Committee met four times during the past
fiscal year and currently consists of the following Trustees: Ms. Hennigar
(Chairperson), Mr. Allen, Ms. Jacobs, Mr. McCarthy, and Mr. Shisler.
OWNERSHIP OF SHARES OF GARTMORE MUTUAL FUNDS AS OF DECEMBER 31, 2006
All Trustees and Officers of the Trust, as a group, own less than 1% of the Trust's outstanding shares.
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(1) (2) (3)
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NAME OF TRUSTEE DOLLAR RANGE OF EQUITY SECURITIES AND/OR AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES AND/OR
SHARES IN THE FUNDS SHARES IN ALL REGISTERED INVESTMENT COMPANIES
OVERSEEN BY TRUSTEE IN FAMILY OF INVESTMENT
COMPANIES
=========================================================================================================================
Charles E. Allen $10,001 - $50,000 $10,001 - $50,000
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Paula H.J. $50,001 - $100,000 $50,001 - $100,000
Cholmondeley
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C. Brent DeVore over $100,000 over $100,000
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Phyllis Kay Dryden $10,001 - $50,000 $10,001 - $50,000
=========================================================================================================================
Barbara L. Hennigar $10,001 - $50,000 $10,001 - $50,000
=========================================================================================================================
Barbara I. Jacobs $50,001 - $100,000 $50,001 - $100,000
=========================================================================================================================
Douglas F. Kridler over $100,000 over $100,000
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David C. Wetmore over $100,000 over $100,000
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Arden L. Shisler over $100,000 over $100,000
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Michael D. McCarthy over $100,000 over $100,000
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OWNERSHIP IN THE FUNDS' INVESTMENT ADVISERS(1), SUBADVISERS(2) OR DISTRIBUTOR
(3) AS OF OCTOBER 31, 2006
TRUSTEES WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) OF THE FUNDS
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(1) (2) (3) (4) (5) (6)
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NAME OF TRUSTEE NAME OF OWNERS AND NAME OF COMPANY TITLE OF CLASS OF VALUE OF PERCENT OF CLASS
RELATIONSHIPS TO SECURITY SECURITIES
TRUSTEE
=========================================================================================================================
Charles E. Allen N/A N/A N/A NONE N/A
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Paula H.J. N/A N/A N/A NONE N/A
Cholmondeley
=========================================================================================================================
C. Brent DeVore N/A N/A N/A NONE N/A
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Phyllis Kay Dryden N/A N/A N/A NONE N/A
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Barbara L. Hennigar N/A N/A N/A NONE N/A
=========================================================================================================================
Barbara I. Jacobs N/A N/A N/A NONE N/A
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Douglas F. Kridler N/A N/A N/A NONE N/A
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Michael D. McCarthy N/A N/A N/A NONE N/A
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David C. Wetmore N/A N/A N/A NONE N/A
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(1) Investment advisers include Gartmore Mutual Fund Capital Trust and Gartmore Morley Capital Management, Inc. ("GMCM").
(2) Subadvisers include BlackRock Investment Management, LLC, Gartmore Global Partners, and NorthPointe Capital, LLC.
(3) Gartmore Distribution Services, Inc., or any company, other than an investment company, that controls a Fund's adviser or distributor.
COMPENSATION OF TRUSTEES
The Trustees receive fees and reimbursement for expenses of attending board meetings from the Trust. Each Adviser, based upon a pro rata share for the Funds for which it acts as investment adviser, reimburses the Trust for fees and expenses paid to Trustees who are interested persons of the Trust and who are employees of an adviser or its affiliates. The Compensation Table below sets forth the total compensation paid to the Trustees of the Trust, before reimbursement of expenses, for the fiscal year ended October 31, 2006. In addition, the table sets forth the total compensation to be paid to the Trustees from all funds in the Fund Complex for the twelve months ended October 31, 2006. Trust officers receive no compensation from the Trust in their capacity as officers.
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(1) (2) (3) (4) (5)
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PENSION RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL
COMPENSATION FROM AS PART OF TRUST BENEFITS UPON TOTAL COMPENSATION FROM THE
NAME OF TRUSTEE THE TRUST EXPENSES RETIREMENT FUND COMPLEX*
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Charles E. Allen $65,375 $0 $0 $131,000
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Paula H.J. Cholmondeley $62,875 $0 $0 $126,000
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C. Brent DeVore $57,125 $0 $0 $114,250
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Phyllis Kay Dryden $64,000 $0 $0 $128,000
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Barbara L. Hennigar $57,125 $0 $0 $114,250
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Barbara I. Jacobs $67,375 $0 $0 $133,750
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(1) (2) (3) (4) (5)
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PENSION RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL
COMPENSATION FROM AS PART OF TRUST BENEFITS UPON TOTAL COMPENSATION FROM THE
NAME OF TRUSTEE THE TRUST EXPENSES RETIREMENT FUND COMPLEX*
====================================================================================================================
Douglas F. Kridler $56,125 $0 $0 $112,250
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Michael D. McCarthy $52,625 $0 $0 $106,250
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Arden L. Shisler $46,750 $0 $0 $93,500
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David C. Wetmore $86,125 $0 $0 $172,500
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* On October 31, 2006 the Fund Complex included two trusts comprised of 89 investment company funds or series.
The Trust does not maintain any pension or retirement plans for the Officers or Trustees of the Trust.
Each of the Trustees and officers and their families are eligible to purchase Class D shares of the Funds which offer Class D shares, at net asset value without any sales charge.
CODE OF ETHICS
Federal law requires the Trust, each of its investment advisers and sub-advisers, and its principal underwriter to adopt codes of ethics which govern the personal securities transactions of their respective personnel. Accordingly, each such entity has adopted a code of ethics pursuant to which their respective personnel may invest in securities for their personal accounts (including securities that may be purchased or held by the Trust). Copies of these Codes of Ethics are on file with the SEC and are available to the public.
PROXY VOTING GUIDELINES
Federal law requires the Trust and each of its investment advisers and subadvisers to adopt procedures for voting proxies ("Proxy Voting Guidelines") and to provide a summary of those Proxy Voting Guidelines used to vote the securities held by the Funds. The summary of such Proxy Voting Guidelines is attached as Appendix B to this SAI.
INVESTMENT ADVISORY AND OTHER SERVICES
TRUST EXPENSES
The Trust pays the compensation of the Trustees who are not employees of NWD Investment Management, Inc. ("NWD"), or its affiliates, the compensation of Mr. Shisler listed above, and all expenses (other than those assumed by the applicable adviser), including governmental fees, interest charges, taxes, membership dues in the Investment Company Institute allocable to the Trust; investment advisory fees and any Rule 12b-1 fees; fees under the Trust's Fund Administration and Transfer Agency Agreement, which includes the expenses of calculating the Funds' net asset values; fees and expenses of independent certified public accountants and legal counsel of the Trust and to the independent Trustees; expenses of preparing, printing, and mailing shareholder reports, notices, proxy statements, and reports to governmental offices and commissions; expenses connected with the execution, recording, and settlement of portfolio security transactions; short sale dividend expenses; insurance premiums; administrative services fees under an Administrative Services Plan; fees and expenses of the custodian for all services to the Trust; expenses of shareholder meetings; and expenses relating to the issuance, registration, and qualification of shares of the Trust. GMFCT or GMCM, as applicable, may, from time to time, agree to voluntarily or contractually waive advisory fees, and if necessary reimburse expenses, in order to limit total operating expenses for each Fund and/or classes, as described below. These expense limitations apply to the classes described; if a particular class is not referenced, there is no expense limitation for that class.
INVESTMENT ADVISERS
Under the applicable Investment Advisory Agreements with the Trust, GMFCT manages the Funds in accordance with the policies and procedures established by the Trustees, except for the following Funds which are advised by affiliates of GMFCT as described below:
FUNDS ADVISED BY GMCM
Gartmore Short Duration Bond Fund
Gartmore Enhanced Income Fund
Except as described below, the investment adviser for each Fund manages the day-to-day investments of the assets of the Funds. For certain Funds, GMFCT also provides investment management evaluation services in initially selecting and monitoring on an ongoing basis the performance of one or more subadvisers who manage the investment portfolio of a particular Fund. GMFCT is also authorized to select and place portfolio investments on behalf of such subadvised Funds; however GMFCT does not intend to do so at this time.
The following Funds are subadvised:
Gartmore Emerging Markets Fund Gartmore Worldwide Leaders Fund
Gartmore Global Utilities Fund Gartmore Bond Index Fund
Gartmore International Growth Fund Gartmore International Index Fund
Gartmore Large Cap Value Fund Gartmore S&P 500 Index Fund
Gartmore Value Opportunities Fund Gartmore Mid Cap Market Index Fund
Gartmore China Opportunities Fund Gartmore Small Cap Index Fund
NorthPointe Small Cap Value Fund
NorthPointe Small Cap Growth Fund
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GARTMORE MUTUAL FUND CAPITAL TRUST
GMFCT pays the compensation of the officers of the Trust employed by GMFCT and pays a pro rata portion of the compensation and expenses of the Trustees who are employed by NWD and its affiliates. GMFCT also furnishes, at its own expense, all necessary administrative services, office space, equipment, and clerical personnel for servicing the investments of the Trust and maintaining its investment advisory facilities, and executive and supervisory personnel for managing the investments and effecting the portfolio transactions of the Trust. In addition, GMFCT pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other financial institutions in exchange for their selling of shares of the Trust's series or for recordkeeping or other shareholder related services.
The Investment Advisory Agreement also specifically provides that GMFCT, including its directors, officers, and employees, shall not be liable for any error of judgment, or mistake of law, or for any loss arising out of any investment, or for any act or omission in the execution and management of the Trust, except for willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties under the Agreement. The Agreement continues in effect for an initial period of one year and thereafter shall continue automatically for successive annual periods provided such continuance is specifically approved at least annually by the Trustees, or by vote of a majority of the outstanding voting securities of the Trust, and, in either case, by a majority of the Trustees who are not parties to the Agreement or interested persons of any such party. The Agreement terminates automatically in the event of its "assignment," as defined under the 1940 Act. It may be terminated as to a Fund without penalty by vote of a majority of the outstanding voting securities of that Fund, or by either party, on not less than 60 days written notice. The Agreement further provides that GMFCT may render similar services to others.
GMFCT, located at 1200 River Road, Suite 1000, Conshohocken, PA 19428, is a wholly owned subsidiary of NWDIMI , a holding company which is an indirect wholly owned subsidiary of Nationwide Corporation. All of the common stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policy holders.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of GMFCT, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase GMFCT (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with GMFCT. The purchase of GMFCT by NFS may be deemed to constitute a change of control, terminating GMFCT's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with GMFCT with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with GMFCT are subject to the approval of the Fund's respective shareholders. The sale of GMFCT to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management plc (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
For services provided under the Investment Advisory Agreement, GMFCT receives an annual fee paid monthly based on average daily net assets of the applicable Fund according to the following schedule:
FUND ASSETS INVESTMENT ADVISORY FEE
---- ------ -----------------------
Gartmore Mid Cap Growth Leaders $0 up to $250 million 0.80%
Fund $250 million up to $1 billion 0.77%
$1 billion up to $2 billion 0.74%
$2 billion up to $5 billion 0.71%
$5 billion and more 0.68%
Gartmore Growth Fund $0 up to $250 million 0.60%
Gartmore Nationwide Fund $250 million up to $1 billion 0.575%
$1 billion up to $2 billion 0.55%
$2 billion up to $5 billion 0.525%
$5 billion and more 0.50%
Gartmore Bond Fund, $0 up to $250 million 0.50%
Gartmore Tax-Free Income Fund, and $250 million up to $1 billion 0.475%
Gartmore Government Bond Fund $1 billion up to $2 billion 0.45%
$2 billion up to $5 billion 0.425%
$5 billion and more 0.40%
Gartmore Money Market Fund $0 up to $1 billion 0.40%
$1 billion up to $2 billion 0.38%
$2 billion up to $5 billion 0.36%
$5 billion and more 0.34%
Gartmore S&P 500 Index Fund $0 up to $1.5 billion 0.13%
$1.5 billion up to $3 billion 0.12%
$3 billion up to $4.5 billion 0.11%
$4.5 billion and more 0.10%
Gartmore Small Cap Index Fund $0 up to $1.5 billion 0.20%
$1.5 billion up to $3 billion 0.19%
$3 billion and more 0.18%
Gartmore Mid Cap Market Index $0 up to $1.5 billion 0.22%
Fund $1.5 billion up to $3 billion 0.21%
$3 billion and more 0.20%
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FUND ASSETS INVESTMENT ADVISORY FEE
---- ------ -----------------------
Gartmore Bond Index Fund $0 up to $1.5 billion 0.22%
$1.5 billion up to $3 billion 0.21%
$3 billion and more 0.20%
Gartmore International Index Fund $0 up to $1.5 billion 0.27%
$1.5 billion up to $3 billion 0.26%
$3 billion and more 0.25%
Gartmore Large Cap Value Fund up to $100 million 0.75%
$100 million or more 0.70%
Gartmore Small Cap Fund up to $100 million 0.95%
$100 million or more 0.80%
Gartmore Small Cap Leaders Fund All Assets 0.95%
Gartmore Value Opportunities Fund $0 up to $250 million 0.70%
$250 million up to $1 billion 0.675%
$1 billion up to $2 billion 0.65%
$2 billion up to $5 billion 0.625%
$5 billion and more 0.60%
NorthPointe Small Cap Value Fund All assets 0.85%
Gartmore Global Natural Resources $0 up to $500 million 0.70%
Fund(1) $500 million up to $2 billion 0.65%
$2 billion and more 0.60%
Gartmore Global Technology and $0 up to $500 million 0.88%
Communications Fund(2) $500 million up to $2 billion 0.83%
$2 billion and more 0.78%
Gartmore Global Health Sciences $0 up to $500 million 0.90%
Fund(3) $500 million up to $2 billion 0.85%
$2 billion and more 0.80%
Gartmore U.S. Growth Leaders Fund(4) $0 up to $500 million 0.90%
$500 million up to $2 billion 0.80%
$2 billion and more 0.75%
Gartmore Nationwide Leaders Fund(5) $0 up to $500 million 0.80%
$500 million up to $2 billion 0.70%
$2 billion and more 0.65%
Gartmore Investor Destinations: All assets 0.13%
Aggressive Fund
Moderately Aggressive Fund
Moderate Fund
Moderately Conservative Fund
Conservative Fund
Gartmore Micro Cap Equity Fund All assets 1.25%
Gartmore Mid Cap Growth Fund $0 up to $250 million 0.75%
$250 million up to $1 billion 0.725%
$1 billion up to $2 billion 0.70%
$2 billion up to $5 billion 0.675%
$5 billion and more 0.65%
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FUND ASSETS INVESTMENT ADVISORY FEE
---- ------ -----------------------
Gartmore U.S. Growth Leaders $0 up to $250 million 1.50%
Long-Short Fund $250 million and more 1.25%
Gartmore China Opportunities Fund(6) $0 up to $500 million 1.25%
$500 million up to $2 billion 1.20%
$2 billion and more 1.15%
Gartmore Optimal Allocations All Assets 0.15%
Funds:
Growth Fund
Moderate Growth Fund
Moderate Fund
Specialty Fund
Defensive Fund
NorthPointe Small Cap Growth Fund All Assets 0.95%
Gartmore Emerging Markets Fund(7) $0 up to $500 million 1.05%
$500 million up to $2 billion 1.00%
$2 billion and more 0.95%
Gartmore International Growth Fund(8) $0 up to $500 million 0.90%
$500 million up to $2 billion 0.85%
$2 billion and more 0.80%
Gartmore Worldwide Leaders Fund(9) $0 up to $500 million 0.90%
$500 million up to $2 billion 0.85%
$2 billion and more 0.80%
Gartmore Global Financial Services $0 up to $500 million 0.90%
Fund(10) $500 million up to $2 billion 0.85%
$2 billion and more 0.80%
Gartmore Global Utilities Fund(11) $0 up to $500 million 0.70%
$500 million up to $2 billion 0.65%
$2 billion and more 0.60%
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(1) The advisory fee at each breakpoint for the Gartmore Global Natural Resources Fund is a base fee, and actual fees may be higher or lower depending upon the Fund's performance relative to its benchmark, the Goldman Sachs Natural Resources Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(2) The advisory fee at each breakpoint for the Gartmore Global Technology and Communications Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the Goldman Sachs Technology Composite Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(3) The advisory fee at each breakpoint for the Gartmore Global Health Sciences Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the Goldman Sachs Healthcare Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(4) The advisory fee at each breakpoint for the Gartmore U.S. Growth Leaders Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the S&P 500 Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(5) The advisory fee at each breakpoint for the Gartmore Nationwide Leaders Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the S&P 500 Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(6) The advisory fee at each breakpoint for the Gartmore China Opportunities Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the MSCI Zhong Hua Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount the Fund will pay lower fees.
(7) The advisory fee at each breakpoint for the Gartmore Emerging Markets Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the MSCI Emerging Markets Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(8) The advisory fee at each breakpoint for the Gartmore International Growth Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the MSCI All Country World Index Free ex US. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(9) The advisory fee at each breakpoint for the Gartmore Worldwide Leaders Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the MSCI World Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(10) The advisory fee at each breakpoint for the Gartmore Global Financial Services Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark, the MSCI World Financial Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
(11) The advisory fee at each breakpoint for the Gartmore Global Utilities Fund is a base fee and actual fees may be higher or lower depending on the Fund's performance relative to its composite benchmark comprised of 60% MSCI World Telecommunication Services Index and 40% MSCI World Utilities Index. If the Fund outperforms its benchmark by a set amount, the Fund will pay higher investment advisory fees. Conversely, if the Fund underperforms its benchmark by a set amount, the Fund will pay lower fees.
PERFORMANCE FEES
GARTMORE GLOBAL NATURAL RESOURCES FUND, GARTMORE GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND, GARTMORE GLOBAL HEALTH SCIENCES FUND, GARTMORE NATIONWIDE LEADERS FUND, GARTMORE CHINA OPPORTUNITIES FUND, GARTMORE EMERGING MARKETS FUND, GARTMORE INTERNATIONAL GROWTH FUND, GARTMORE WORLDWIDE LEADERS FUND, GARTMORE GLOBAL FINANCIAL SERVICES FUND AND GARTMORE GLOBAL UTILITIES FUND
As described above and in each of the Fund's prospectus, each Fund is
subject to a base investment advisory fee that may be adjusted if the Fund
outperforms or underperforms its stated benchmark over a 12 month rolling
period. The base fee is either increased or decreased proportionately by the
following amounts at each breakpoint, based upon whether the Fund has
outperformed or underperformed its benchmark over the preceding 12 month rolling
period as follows:
Out or Under Change in Fees Performance +/- 100 bps 2bps +/- 200 bps 4bps +/- 300 bps 6bps +/- 400 bps 8bps +/- 500 bps or more 10bps |
As a result, the highest possible advisory fee at each breakpoint and lowest possible advisory fee at each breakpoint are as follows:
-------------------------------------------- -----------------------------------
Global Technology and
Communications Fund
Possible Advisory Fees
Base Advisory Fee Highest Lowest
-------------------------------------------- -----------------------------------
0.88% for assets up to $500 million 0.98% 0.78%
-------------------------------------------- -----------------------------------
0.83% for assets of $500 million and more 0.93% 0.73%
but less than $2 billion
-------------------------------------------- -----------------------------------
0.78% on assets of $2 billion and more 0.88% 0.68%
-------------------------------------------- -----------------------------------
-------------------------------------------- -----------------------------------
Global Natural Resources Fund
Possible Advisory Fees
Base Advisory Fee Highest Lowest
-------------------------------------------- -----------------------------------
0.70% for assets up to $500 million 0.80% 0.60%
------------------------------------------- -----------------------------------
0.65% for assets of $500 million and more 0.75% 0.55%
but less than $2 billion
------------------------------------------- -----------------------------------
0.60% on assets of $2 billion and more 0.70% 0.50%
------------------------------------------- -----------------------------------
------------------------------------------ ------------------------------------
Global Health Sciences
Possible Advisory Fees
Base Advisory Fee Highest Lowest
------------------------------------------ ------------------------------------
0.90% for assets up to $500 million 1.00% 0.80%
------------------------------------------ ------------------------------------
0.85% for assets of $500 million and 0.95% 0.75%
more but less than $2 billion
------------------------------------------ ------------------------------------
0.80% on assets of $2 billion or more 0.90% 0.70%
------------------------------------------ ------------------------------------
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------------------------------------------ ------------------------------------
China Opportunities Fund
Possible Advisory Fees
Base Advisory Fee Highest Lowest
------------------------------------------ ------------------------------------
1.25% for assets up to $500 million 1.35% 1.15%
------------------------------------------ ------------------------------------
1.20% for assets of $500 million and 1.30% 1.10%
more but less than $2 billion
------------------------------------------ ------------------------------------
1.15% on assets of $2 billion or more 1.25% 1.05%
------------------------------------------ ------------------------------------
------------------------------------------ ------------------------------------
Nationwide Leaders Fund
Possible Advisory Fees
Base Advisory Fee Highest Lowest
------------------------------------------ ------------------------------------
0.80% for assets up to $500 million 0.90% 0.70%
------------------------------------------ ------------------------------------
0.70% for assets of $500 million and 0.80% 0.60%
more but less than $2 billion
------------------------------------------ ------------------------------------
0.65% on assets of $2 billion or more 0.75% 0.55%
------------------------------------------ ------------------------------------
------------------------------------------ ------------------------------------
Global Utilities Fund
Possible Advisory Fees
Base Advisory Fee Highest Lowest
------------------------------------------ ------------------------------------
0.70% for assets up to $500 million 0.80% 0.60%
------------------------------------------ ------------------------------------
0.65% for assets of $500 million and 0.75% 0.55%
more but less than $2 billion
------------------------------------------ ------------------------------------
0.60% on assets of $2 billion and more 0.70% 0.50%
------------------------------------------ ------------------------------------
------------------------------------------ ------------------------------------
International Growth, Worldwide
Leaders and Global Financial
Services Fund
Possible Advisory Fees
Base Advisory Fee Highest Lowest
------------------------------------------ ------------------------------------
0.90% for assets up to $500 million 1.00% 0.80%
------------------------------------------ ------------------------------------
0.85% for assets of $500 million and 0.95% 0.75%
more but less than $2 billion
------------------------------------------ ------------------------------------
0.80% on assets of $2 billion and more 0.90% 0.70%
------------------------------------------ ------------------------------------
69
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------------------------------------------ ------------------------------------
Emerging Markets Fund
Possible Advisory Fees
Base Advisory Fee Highest Lowest
------------------------------------------- ------------------------------------
1.05% for assets up to $500 million 1.15% 0.95%
------------------------------------------- ------------------------------------
1.00% for assets of $500 million and more 1.10% 0.90%
but less than $2 billion
------------------------------------------- ------------------------------------
0.95% on assets of $2 billion and more 1.05% 0.85%
------------------------------------------- ------------------------------------
|
The performance adjustment for each of these Funds works as follows. If a Fund outperforms its respective benchmark by a maximum of 500 basis points over the preceding 12 month rolling performance period, the advisory fees for such Fund for the most recently completed calendar quarter will increase by a maximum of 10 basis points over each such Fund's respective base fee. If, however, the Fund underperforms its benchmark by a maximum of 500 basis points over the preceding 12 month rolling performance period, the advisory fees for such Fund for the most recently completed calendar quarter would go down by a maximum of 10 basis points. In the event that a Fund outperforms or underperforms its benchmark by less than 100 basis points over the preceding 12 month rolling performance period, no adjustment will take place and GMFCT will receive the applicable base fee.
The base rate and the performance rate are applied separately. The base rate (as may be reduced by any applicable base advisory fee breakpoints) is applied to each Fund's respective average net assets over the most recent quarter, while the performance adjustment rate is applied to such Fund's respective average net assets over the preceding 12 month rolling performance period. The corresponding dollar values are then added to arrive at the total GMFCT advisory fee for the current period.
By way of example, assume a Fund's maximum performance adjustment rate of 0.10% is achieved by comparing performance of the Fund to its respective benchmark index over the preceding 12 month rolling performance period ended October 31, 2007. Further assume that GMFCT is earning a base advisory fee for such Fund at an annualized rate of 0.90%. GMFCT would receive as its fee for the quarter ending October 31, 2007 one-fourth of the annualized rate of 0.90% times the Fund's average net assets for the quarter, plus one-fourth the annualized rate of 0.10% times the Fund's average net assets over the 12 month rolling performance period ended October 31, 2007. It is important to note that by charging the base fee and the performance fee on average net assets over the most recently completed quarter and 12 month rolling performance period, respectively, the fees would be higher in times of generally declining net assets (due to either a market decline or net redemptions) than if the fees were charged on the basis of current net assets. Conversely, in times of generally increasing net assets (due to either a market increase or net purchases) the fees generally would be lower than if the fees were charged on the basis of current net assets.
Fund Benchmark
Gartmore Global Natural Resources Fund Goldman Sachs Natural Resources Index
Gartmore Global Health Sciences Fund Goldman Sachs Healthcare Index
Gartmore Nationwide Leaders Fund S&P 500 Index
Gartmore Global Technology and Goldman Sachs Technology Composite
Communications Fund Index
Gartmore China Opportunities Fund MSCI Zhong Hua Index
Gartmore Emerging Markets Fund MSCI Emerging Markets Index
Gartmore International Growth Fund MSCI All Country World Index Free ex US
Gartmore Worldwide Leaders Fund MSCI World Index
Gartmore Global Financial Services MSCI World Financial Index
Fund 60% MSCI World Telecommunication
Gartmore Global Utilities Fund Service Index, 40% MSCI World
Utilities Service Index
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GARTMORE U.S. GROWTH LEADERS FUND
As described above and in the Fund's Prospectus, the Gartmore U.S. Growth Leaders Fund is subject to base investment advisory fees that may be adjusted if
the Fund out- or under-performs its stated benchmark over a 36-month rolling performance period. Set forth below is further information about the advisory fee arrangements of the Fund:
FUND BENCHMARK REQUIRED EXCESS BASE ADVISORY HIGHEST POSSIBLE LOWEST POSSIBLE
PERFORMANCE FEE ADVISORY FEE AT ADVISORY FEE AT
EACH BREAK POINT EACH BREAK POINT
Gartmore S&P 500 Index 12.0% 0.90% for assets 1.12% 0.68%
U.S. Growth up to $500 million
Leaders Fund
0.80% for assets 0.98% 0.62%
of $500 million
up to $2 billion,
0.75% for assets of 0.91% 0.59%
$2 billion and more
|
The performance adjustment for the U.S. Growth Leaders Fund works as follows. If the Fund outperforms its benchmark, the S&P 500 Index, by more than 12.0% over a 36 month rolling performance period, the advisory fees for the quarter will increase from 0.90% to 1.12% for assets under $500 million. If, however, the Fund underperforms its benchmark by 12.0% over a 36 month rolling performance period, the advisory fees for the quarter would go down to 0.68%. In the event that the Fund outperforms or underperforms its benchmark by less than 12% over a 36 month rolling performance period, no adjustment will take place and GMFCT will receive the applicable base fee.
The base rate and the performance rate are applied separately. The base rate (as may be reduced by any applicable base advisory fee breakpoints) is applied to the Gartmore U.S. Growth Leaders Fund's average net assets over the current quarter, while the performance adjustment percentage is applied to the Gartmore U.S. Growth Leaders Fund's average net assets over the 36 month rolling performance period. The corresponding dollar values are then added to arrive at the total GMFCT advisory fee for the current period.
By way of example, assume the U.S. Growth Leaders Fund's performance adjustment rate of 0.22% is achieved by comparing performance of the Fund to its benchmark index over the rolling 36 month period ended October 31, 2007. Further assume that Gartmore is earning a base advisory fee at an annualized rate of 0.90%. GMFCT would receive as its fee for the quarter ending October 31, 2007 one-fourth of the annualized rate of 0.90% times the Fund's average net assets for the quarter, plus one-fourth the annualized rate of 0.22% times the Fund's average net assets over the rolling 36 month period ended October 31, 2007. It is important to note that by charging the base fee and the performance fee on average net assets over a quarter and rolling 36 month period, respectively, the fees would be higher in times of generally declining net assets (due to either a market decline or net redemptions) than if the fees were charged based on the value of current net assets. Conversely, in times of generally increasing net assets (due to either a market increase or net purchases) the fees generally would be lower than if the fees were charged on the basis of current net assets.
Under the performance fee arrangements described above, each adviser, as applicable, can receive a performance fee increase even if a Fund experiences negative performance that still exceeds its benchmark by more than the relevant percentage amount stated above.
GARTMORE MORLEY CAPITAL MANAGEMENT, INC.
Under the terms of the Trust's investment advisory agreement with GMCM
(the "GMCM Advisory Agreement"), GMCM currently manages the Gartmore Short
Duration Bond Fund and the Gartmore Enhanced Income Fund, two funds of the Trust
(the "Gartmore Morley Funds"), subject to the supervision and direction of the
Board of Trustees. Prior to March 5, 2001, the investment advisory services
being performed for the Gartmore Morley Funds were provided by Union Bond and
Trust Company ("UBTC"), a corporate affiliate of GMCM. GMCM will: (i) act in
strict conformity with the Declaration of Trust and the 1940 Act, as the same
may from time to time be amended; (ii) manage the Gartmore Morley Funds in
accordance with the Funds' investment objectives, restrictions and policies;
(iii) make investment decisions for the Gartmore Morley Funds; and (iv) place
purchase and sale orders for securities and other financial instruments on behalf of the Gartmore Morley Funds. Under the terms of the GMCM Advisory Agreement, GMCM pays the Gartmore Morley Funds' pro rata share of the compensation of the Trustees who are interested persons of the Trust. GMCM also furnishes, at its own expense, all necessary administrative services, office space, equipment, and clerical personnel for servicing the investments of the Gartmore Morley Funds and maintaining its investment advisory facilities, and executive and supervisory personnel for managing the investments and effecting the portfolio transactions of the Gartmore Morley Funds. Likewise, GMCM may pay, out of its legitimate profits, fees to broker-dealers, trust companies, transfer agents and other financial institutions in exchange for their selling of shares or for record keeping or other shareholder related services.
The GMCM Advisory Agreement also specifically provides that GMCM, including its directors, officers, and employees, shall not be liable for any error of judgment, or mistake of law, or for any loss arising out of any investment, or for any act or omission in the execution and management of the Gartmore Morley Funds, except for willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties under the Agreement. The GMCM Advisory Agreement continues in effect for an initial period of one year and thereafter shall continue automatically for successive annual periods as to each Gartmore Morley Fund provided such continuance is specifically approved at least annually by the Trustees, or by vote of a majority of the outstanding voting securities of that Fund, and, in either case, by a majority of the Trustees who are not parties to the Agreement or interested persons of any such party. The GMCM Advisory Agreement terminates automatically in the event of its "assignment," as defined under the 1940 Act. It may be terminated as to a Gartmore Morley Fund without penalty by vote of a majority of the outstanding voting securities of the Fund, or by either party, on not less than 60 days written notice. The GMCM Advisory Agreement further provides that GMCM may render similar services to others.
GMCM has informed the Gartmore Morley Funds that, in making its investment decisions, it does not obtain or use material inside information in its possession or in the possession of any of its affiliates. In making investment recommendations for the Gartmore Morley Funds, GMCM will not inquire or take into consideration whether an issuer of securities proposed for purchase or sale by the Funds is a customer of GMCM, its parent or its affiliates and, in dealing with its customers, GMCM, its parent and affiliates will not inquire or take into consideration whether securities of such customers are held by any fund managed by GMCM or any such affiliate.
GMCM was organized in 1983 as an Oregon corporation and is a registered investment adviser. It focuses its investment management business on providing stable value fixed income management services, primarily to retirement plans. GMCM is a wholly-owned subsidiary of Morley Financial Services, Inc. ("MFS"). MFS, an Oregon corporation, also owns all of the voting securities of UBTC. MFS is a wholly-owned subsidiary of Nationwide Asset Management, Inc. ("NAMI"), a Delaware holding company. NAMI is a wholly-owned subsidiary of Gartmore SA Capital Trust, which is an investment adviser and is wholly-owned by NWDIMI, a Delaware holding company. NWDIMI is an indirect wholly-owned subsidiary of Nationwide Corporation. All of the Common Stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders.
For services provided under the Investment Advisory Agreement, GMCM receives an annual fee paid monthly based on average daily net assets of the applicable Fund according to the following schedule:
FUND ASSETS INVESTMENT ADVISORY FEE
Gartmore Short Duration Bond Fund $0 up to $500 million 0.35%
$500 million up to $1 billion 0.34%
$1 billion up to $3 billion 0.325%
$3 billion up to $5 billion 0.30%
$5 billion up to $10 billion 0.285%
$10 billion and more 0.275%
Gartmore Enhanced Income Fund $0 up to $500 million 0.35%
$500 million up to $1 billion 0.34%
$1 billion up to $3 billion 0.325%
$3 billion up to $5 billion 0.30%
$5 billion up to $10 billion 0.285%
$10 billion and more 0.275%
|
LIMITATION OF FUND EXPENSES
GARTMORE MUTUAL FUND CAPITAL TRUST
In the interest of limiting the expenses of those Funds for whom GMFCT serves as investment adviser, GMFCT may from time to time waive some or all of its investment advisory fee or reimburse other fees for any of those Funds. In this regard, GMFCT has entered into an expense limitation agreement with the Trust on behalf of certain of the Funds (each an "Expense Limitation Agreement"). Pursuant to the Expense Limitation Agreements, GMFCT has agreed to waive or limit its fees and to assume other expenses to the extent necessary to limit the total annual operating expenses of each Class of each such Fund to the limits described below. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles, expenses incurred by a Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. Please note that the waiver of such fees will cause the total return and yield of a Fund to be higher than they would otherwise be in the absence of such a waiver.
With respect to the following funds, Gartmore Large Cap Value Fund,
Gartmore Small Cap Value Fund, Gartmore Global Technology and Communications
Fund, Gartmore Global Health Sciences Fund, NorthPointe Small Cap Value Fund,
Gartmore Value Opportunities Fund, Gartmore U.S. Growth Leaders Fund, Gartmore
Micro Cap Equity Fund, Gartmore Investor Destinations Aggressive Fund, Gartmore
Investor Destinations Moderately Aggressive Fund, Gartmore Investor Destinations
Moderate Fund, Gartmore Investor Destinations Moderately Conservative Fund,
Gartmore Investor Destinations Conservative Fund, Gartmore S&P 500 Index Fund,
Gartmore Small Cap Index Fund, Gartmore Mid Cap Market Index Fund, Gartmore
International Index Fund and Gartmore Bond Index Fund, GMFCT may request and
receive reimbursement from the Funds for the advisory fees waived or limited and
other expenses reimbursed by GMFCT pursuant to the Expense Limitation Agreement
at a later date but no more than five years from the fiscal year in which a
waiver or reimbursement was made and the Fund has reached a sufficient asset
size to permit reimbursement to be made without causing the total annual
operating expense ratio of the Fund to exceed the limits in the Expense
Limitation Agreement. No reimbursement will be made to a Fund unless: (i) such
Fund's assets exceed $100 million; (ii) the total annual expense ratio of the
Class making such reimbursement is less than the limit set forth below; and
(iii) the payment of such reimbursement is approved by the Board of Trustees on
a quarterly basis. Except as provided for in the Expense Limitation Agreement,
reimbursement of amounts previously waived or assumed by GMFCT is not permitted.
With respect to the Gartmore U.S. Growth Leaders Long-Short Fund, Gartmore
Mid Cap Growth Fund, Gartmore Mid Cap Growth Leaders Fund, Gartmore Money Market
Fund, Gartmore Small Cap Leaders Fund, Gartmore China Opportunities Fund,
Gartmore Global Natural Resources Fund and the Gartmore Optimal Allocations
Funds, GMFCT may request and receive reimbursement from the Funds for the
advisory fees waived or limited and other expenses reimbursed by GMFCT pursuant
to the Expense Limitation Agreement at a later date when a Fund has reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual operating expense ratio of the Fund to exceed the limits in the
Expense Limitation Agreement. No reimbursement will be made to a Fund unless:
(i) such Fund's assets exceed $100 million; (ii) the total annual expense ratio
of the Class making such reimbursement is less than the limit set forth below;
(iii) the payment of such reimbursement is approved by the Board of Trustees on
a quarterly basis; and (iv) the payment of such reimbursement is made no more
than three years from the fiscal year in which the corresponding waiver or
reimbursement to the Fund was made. Except as provided for in the Expense
Limitation Agreement, reimbursement of amounts previously waived or assumed by
GMFCT is not permitted.
Until at least February 28, 2008 GMFCT has agreed contractually to waive advisory fees and, if necessary, reimburse expenses in order to limit total annual fund operating expenses, excluding any taxes, interest, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, short sale dividend expenses, Rule 12b-1 fees, fees paid
pursuant to an Administrative Services Plan, other expenditures which are capitalized in accordance with generally accepted accounting principles, expenses incurred by a Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business, for certain Funds of the Trust as follows(1):
o Gartmore Mid Cap Growth Leaders Fund to 1.20% for Class A shares, Class B shares, Class C shares, Class D shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Large Cap Value Fund to 1.15% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Class shares and Institutional Service Class shares
o Gartmore Small Cap Leaders Fund to 1.35% Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore S&P 500 Index Fund to 0.23% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, Service Class shares, Institutional Class shares, and Local Fund shares
o Gartmore U.S. Growth Leaders Fund to 1.30% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Value Opportunities Fund to 1.10% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o NorthPointe Small Cap Value Fund to 1.00% for Institutional Class shares
o Gartmore Global Technology and Communications Fund to 1.38% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Global Health Sciences Fund to 1.40% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Nationwide Leaders Fund to 1.20% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Each of the Investor Destinations Funds to 0.25% for Class A shares, Class B shares, Class C shares, Class R shares, Service Class shares, and Institutional Class shares
o Gartmore Small Cap Index Fund to 0.30% for Class A shares, Class B shares, Class C shares, Class R shares, and Institutional Class shares
o Gartmore Mid Cap Market Index Fund to 0.32% for Class A shares, Class B shares, Class C shares, Class R shares, and Institutional Class shares o Gartmore International Index Fund to 0.37% for Class A shares, Class B shares, Class C shares, Class R shares, and Institutional Class shares
o Gartmore Bond Index Fund to 0.32% for Class A shares, Class B shares, Class C shares, Class R shares, and Institutional Class shares
o Gartmore Micro Cap Equity Fund to 1.65% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Mid Cap Growth Fund to 1.15% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore U.S. Growth Leaders Long-Short Fund to 1.65% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares(2)
o Gartmore China Opportunities Fund to 1.75% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Global Natural Resources Fund for 1.20% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Optimal Allocations Funds to 0.25% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Money Market Fund to 0.59% for Prime shares, Service Class shares, Class C shares, and Institutional Class shares (1), (3)
o Gartmore Emerging Markets Fund to 1.55% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore International Growth Fund to 1.40% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Worldwide Leaders Fund to 1.40% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Global Financial Services Fund to 1.40% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
o Gartmore Global Utilities Fund to 1.20% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares
(2) GMFCT has agreed to waive an amount equal to 0.25% from its management fee.
(3) In addition, with respect to the Service Class of the Gartmore Money Market Fund, effective until at least February 28, 2008, the Fund Operating Expenses including the Rule 12b-1 fees and fees paid pursuant to an Administrative Services Plan shall be limited to 0.75%. In addition, with respect to all classes of the Gartmore Money Market Fund, effective until at least May 1, 2008.
GARTMORE MORLEY CAPITAL MANAGEMENT, INC.
Like GMFCT, and at least until February 28, 2008, GMCM has agreed contractually to waive advisory fees and, if necessary, reimburse expenses in order to limit total annual Fund operating expenses (excluding any interest, taxes, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, short sale dividend expenses, Rule 12b-1 fees, fees paid pursuant to an administrative services plan and other expenditures which are capitalized in accordance with generally accepted accounting principles, expenses incurred by a Fund in connection with any merger or reorganization and other extraordinary expenses) for the Gartmore Morley Funds as follows:
o Gartmore Short Duration Bond Fund to 0.55% for Class A shares, Class C shares, Service Class shares, IRA Class shares, and Institutional Class shares
o Gartmore Enhanced Income Fund to 0.45% for Institutional Service Class shares, Class A shares, Class R shares, and Institutional Class shares
Reimbursement by the Gartmore Short Duration Bond Fund of the advisory fees waived or limited and other expenses reimbursed by GMCM pursuant to the Expense Limitation Agreement may be made at a later date when the Fund has reached a sufficient asset size to permit reimbursement to be made without causing the total annual operating expense ratio of the Fund to exceed the limits in the Expense Limitation Agreement. No reimbursement will be made unless: (i) the Fund's assets exceed $100 million; (ii) the total annual expense ratio of the Class making such reimbursement is less than the limit set forth above; (iii) the payment of such reimbursement is approved by the Board of Trustees on a quarterly basis; and (iv) the payment of such reimbursement is made no more than three years from the fiscal year in which the corresponding reimbursement to the Fund was made. Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by GTC or GMCM is not permitted.
Reimbursement by the Gartmore Enhanced Income Fund of the advisory fees waived or limited and other expenses reimbursed by GMCM pursuant to the Expense Limitation Agreement may be made at a later date, but not later than five years after the Fund commenced operations, when the Fund has reached a sufficient asset size to permit reimbursement to be made without causing the total annual operating expense ratio of the Fund to exceed the limits in the Expense Limitation Agreement. No reimbursement will be made unless: (i) the Fund's assets exceed $100 million; (ii) the total annual expense ratio of the Class making such reimbursement is less than the limit set forth above; and (iii) the payment of such reimbursement is approved by the Board of Trustees on a quarterly basis. Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by GTC or GMCM is not permitted.
NORTHPOINTE CAPITAL, LLC
Like GMFCT and GMCM, and at least until February 28, 2008, NorthPointe, as subadviser, has agreed contractually to waive advisory fees and, if necessary, reimburse expenses in order to limit total annual Fund operating expenses (excluding any interest, taxes, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, Rule 12b-1 fees, fees paid pursuant to an Administrative Services Plan, short sale dividend expenses and other expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary expenses) for the NorthPointe Small Cap Growth Fund as follows:
o NorthPointe Small Cap Growth Fund to 1.10% for Class A, Class B, Class C, Class R, Institutional Service Class and Institutional Class.
NorthPointe may request and receive reimbursement from the Fund for the subadvisory fees waived or limited and other expenses reimbursed by NorthPointe pursuant to the Expense Limitation Agreement at a later date provided that no reimbursements will continue to accrue for more than three years after the fiscal year when NorthPointe waived its subadvisory fees or reimbursed other expenses and further provided that such reimbursements will not cause the total annual operating expenses to exceed the limit set forth above. No reimbursement will be made unless (i) the Fund's assets exceed $100 million; (ii) the total annual expense ratio of the Class making such reimbursement is less than the limit set forth above; and (iii) the payment of such reimbursement is approved by the Board of Trustees on a quarterly basis. Except as provided for in the Expense Limitation Agreement, reimbursement of amounts previously waived or assumed by NorthPointe is not permitted.
INVESTMENT ADVISORY FEES
During the fiscal years ended October 31, 2006, 2005 and 2004 (unless otherwise noted), GMFCT and GMCM earned the following fees for investment advisory services:
GMFCT INVESTMENT ADVISORY FEES
--------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------------
2006 2005 2004
--------------------------------------------------------------------------------------------
FEES FEES FEES FEES FEES FEES
FUND EARNED(1) REIMBURSED EARNED(1) REIMBURSED EARNED(1) REIMBURSED
Gartmore Optimal Allocations
Fund: Growth $0 $ 59,804 $0 $88,800 $498(2) $40,836
Gartmore Optimal Allocations
Fund: Moderate Growth 0 61,571 0 96,103 518(2) 40,408
Gartmore Optimal Allocations
Fund: Moderate 0 61,040 0 93,106 512(2) 40,411
Gartmore Optimal Allocations
Fund: Specialty 0 75,756 0 104,891 517(2) 40,408
Gartmore Optimal Allocations
Fund: Defensive(3) n/a n/a n/a n/a n/a n/a
Gartmore Bond Fund 560,910 0 $611,058 0 660,495 0
Gartmore China Opportunities
Fund 254,379 22,860 53,056 66,130 24,092(2) 50,098
Gartmore Global Health
Sciences Fund 231,451 0 171,743 16,979 117,729 37,526
Gartmore Global Natural
Resources Fund 348,236 0 25,554 37,587 9,752 21,945
Gartmore Global
Technology and
Communications Fund 97,991 39,246 35,131 45,576 91,528 29,954
Gartmore Government
Bond Fund 765,900 0 864,594 0 973,826 0
Gartmore Growth Fund 1,355,471 0 1,512,351 0 1,725,237 0
Gartmore Investor Destinations
Aggressive Fund 904,652 0 621,717 0 332,308 154
Gartmore Investor Destinations
Moderately Aggressive Fund 1,535,291 0 1,062,546 0 568,544 483
Gartmore Investor Destinations
Moderate Fund 1,698,138 0 1,121,567 0 616,998 237
Gartmore Investor Destinations
Moderately Conservative Fund 376,578 0 291,679 260 184,054 505
Gartmore Investor Destinations
Conservative Fund 248,596 0 206,010 3,651 123,689 14,685
Gartmore Large Cap Value Fund 262,617 0 232,093 8,421 201,770 17,394
Gartmore U.S. Growth Leaders
Long-Short Fund 1,353,017 0 623,524 43,113 404,155 14,723
|
GMFCT INVESTMENT ADVISORY FEES
--------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------------
2006 2005 2004
--------------------------------------------------------------------------------------------
FEES FEES FEES FEES FEES FEES
FUND EARNED(1) REIMBURSED EARNED(1) REIMBURSED EARNED(1) REIMBURSED
Gartmore Micro Cap Equity Fund 1,519,635 0 1,740,056 19,206 958,951 14,021
Gartmore Mid Cap Growth Fund 46,187 27,464 36,261 23,457 34,484
Gartmore Mid Cap Growth Leaders
Fund 318,579 27,262 169,629 83,813 183,545 98,160
Gartmore Money Market Fund 6,310,450 0 6,216,960 1,938 6,418,662 1,937
Gartmore Nationwide Fund 7,369,230 0 7,933,531 0 10,661,161 0
Gartmore Nationwide Leaders Fund 109,349 22,019 54,471 31,180 37,513 49,762
Gartmore Small Cap Fund 1,722,854 0 297,241 3,826 457,989 0
Gartmore Small Cap Leaders Fund 239,221 9,303 30,584 62,315
Gartmore Tax-Free Income Fund 842,625 0 932,283 0 986,039 0
Gartmore U.S. Growth Leaders Fund(5) 1,353,017 0 574,027 0 309,373 45,996
Gartmore Value Opportunities Fund 112,006 47,791 85,209 54,601 281,272 11,918
Gartmore Bond Index Fund 3,857,103 663,758 2,051,322 710,181 1,705,664 450,279
Gartmore International Index Fund 4,540,332 631,723 2,355,335 756,273 1,713,016 381,189
Gartmore Mid Cap Market Index Fund 2,625,630 509,553 1,304,736 519,931 966,746 284,881
Gartmore S&P 500 Index Fund 3,841,921 808,395 1,820,253 1,108,994 1,945,756 653,174
Gartmore Small Cap Index Fund 1,043,208 222,353 457,564 256,790 421,119 171,476
NorthPointe Small Cap Growth Fund 480,852 28,148 435,018 44,324 5,927(4) 7,391
NorthPointe Small Cap Value Fund 233,282 17,755 239,023 4,960 295,327 528
Gartmore Emerging Markets Fund(6) 607,164 0 334,734 0 214,405 19,484
Gartmore Global Financial Services 61,780 33,642 54,371 42,529
Fund(6) 272,215 0
Gartmore Global Utilities Fund(6) 90,092 38,548 14,884 50,361 29,771 47,596
Gartmore International Growth Fund(6) 291,065 2,995 66,804 37,930 78,402 35,945
Gartmore Worldwide Leaders Fund(6) 424,069 25,742 243,227 84,058 330,068 51,866
|
GMFCT INVESTMENT ADVISORY FEES
--------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------------
2006 2005 2004
--------------------------------------------------------------------------------------------
FEES FEES FEES FEES FEES FEES
FUND EARNED(1) REIMBURSED EARNED(1) REIMBURSED EARNED(1) REIMBURSED
Gartmore Short Duration Bond Fund
386,120 0 597,359 238,942 2,693,481 769,558
Gartmore Enhanced Income Fund 1,730,576 180,035 1,141,836 196,148 856,504 120,757
|
(1) Fees net of reimbursement.
(2) Fund commenced operations on June 29, 2004.
(3) Fund commenced operations on December 15, 2006
(4) Fund commenced operations on March 30, 2004.
(5) The Fund has not paid the performance component of its advisory fee since
June 2004.
(6) NWD Management & Research Trust (formerly, Gartmore Global Asset Management
Trust) was the Fund's adviser until September 29, 2006 when it transferred
all of its investment advisory responsibilities to GMFCT, its wholly-owned
subsidiary. Fees stated include those earned by NMRT.
SUBADVISERS
The subadvisers for certain of the Funds advised by GMFCT are as follows:
FUND SUBADVISER
Gartmore Large Cap Value Fund NorthPointe Capital LLC ("NorthPointe")
Gartmore Value Opportunities Fund NorthPointe
NorthPointe Small Cap Value Fund NorthPointe
NorthPointe Small Cap Growth Fund NorthPointe
Gartmore S&P 500 Index Fund BlackRock
Gartmore Small Cap Index Fund BlackRock
Gartmore Mid Cap Market Index Fund BlackRock
Gartmore International Index Fund BlackRock
Gartmore Bond Index Fund BlackRock
Gartmore China Opportunities Fund Gartmore Global Partners ("GGP")
Gartmore Emerging Markets Fund GGP
Gartmore International Growth Fund GGP
Gartmore Worldwide Leaders Fund GGP
Gartmore Global Utilities Fund GGP
|
NorthPointe is a majority-owned indirect subsidiary of NWD, which is also the parent of GMFCT. NorthPointe is located at Columbia Center One, 10th Floor, Suite 1000, 201 West Big Beaver Road, Troy, MI 48084 and was formed in 1999.
In connection with the transactions proposed pursuant to the Purchase Agreement, the Board of Trustees of the Trust has approved a new subadvisory agreement with NorthPointe with respect to each of the Funds advised by NorthPointe. The new subadvisory agreement is subject to the approval of the NorthPointe Funds' respective shareholders. The Board of Trustees of the Trust also has approved the appointment of NorthPointe as the subadviser to the Gartmore Mid Cap Growth Fund, Gartmore Micro Cap Equity Fund and the growth sleeve of the Gartmore Small Cap Leaders Fund ("New NorthPointe Funds"). The portfolio management team that manages each of the New NorthPointe Funds currently on behalf of GMFCT is also employed by NorthPointe. The new subadvisory agreement with NorthPointe is subject to the approval of the New NorthPointe Funds' respective shareholders.
The Board of Trustees of the Trust has approved the appointment of Nationwide Separate Accounts, LLC ("NSA"), an affiliate of GMFCT, as the subadviser to the Gartmore Mid Cap Growth Leaders Fund. The portfolio management team that manages the Gartmore Mid Cap Growth Leaders Fund currently on behalf of GMFCT is also employed by NSA. The new subadvisory agreement with NSA is subject to the approval of the Gartmore Mid Cap Growth Leaders Fund's shareholders.
BlackRock, one of the investment advisory entities which comprise Merrill Lynch Investment Managers, P.O. Box 9011, Princeton, New Jersey 08543-9011, is a limited partnership, the partners of which are ML & Co. and Princeton Services. ML & Co. and Princeton Services are "controlling persons" of BlackRock as defined under the 1940 Act because of their ownership of its voting securities or their power to exercise a controlling influence over its management or policies. On February 15, 2006 BlackRock and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced that they had reached an agreement to merge Merrill Lynch's investment management business, Merrill Lynch Investment Managers, L.P. and certain affiliates (including Fund Asset Management, L.P. ("FAM")), and BlackRock to create a new independent company that will be one of the world's largest asset management firms with nearly $1 trillion in assets under management. Merrill Lynch will hold a 49.8% stake and will have 45% voting interest in the combined company. The new company operates under the BlackRock name and is governed by a board of directors with a majority of independent directors. The transaction was approved by the boards of directors of both Merrill Lynch and BlackRock and closed in the third quarter of 2006. As a result of the above transaction, and subject to approval by the Trust's Board of Trustees, the combined company became the subadviser to each Fund previously subadvised by FAM.
GGP, 8 Fenchurch Place, London, England, United Kingdom, is the subadviser for certain of the Funds and manages each Fund's assets in accordance with the investment objective and strategies. GGP makes investment decisions and executes them by placing purchase and sell orders for securities. GGP was previously an affiliate of GMFCT. However, effective September 29, 2006, GGP is no longer affiliated with GMFCT.
Subject to the supervision of GMFCT and the Trustees, each of the subadvisers manages the assets of the Fund listed above in accordance with the Fund's investment objectives and policies. Each subadviser makes investment decisions for the Fund and in connection with such investment decisions places purchase and sell orders for securities. For the investment management services they provide to the Funds, the subadvisers receive annual fees from GMFCT, calculated at an annual rate based on the average daily net assets of the Funds, in the following amounts:
FUND ASSETS FEE
---- ------ ---
Gartmore Large Cap Value Fund up to $100 million 0.35%
$100 million or more 0.30%
Gartmore Value Opportunities Fund $0 up to $250 million 0.70%
$250 million up to $1 billion 0.675%
$1 billion up to $2 billion 0.65%
$2 billion up to $5 billion 0.625%
$5 billion and more 0.60%
NorthPointe Small Cap Value Fund All assets 0.85%
NorthPointe Small Cap Growth Fund All assets 0.95%
Gartmore S&P 500 Index Fund $0 up to $1.5 billion 0.02%
$1.5 billion to $3 billion 0.015%
$3 billion or more 0.0125%
Gartmore Small Cap Index Fund $0 up to $1.5 billion 0.07%
$1.5 billion to $3 billion 0.06%
$3 billion or more 0.05%
Gartmore Mid Cap Market Index Fund $0 up to $1.5 billion 0.075%
$1.5 billion to $3 billion 0.06%
$3 billion or more 0.05%
Gartmore Bond Index Fund $0 up to $1.5 billion 0.08%
$1.5 billion to $3 billion 0.06%
$3 billion or more 0.05%
Gartmore International Index Fund $0 up to $1.5 billion 0.11%
$1.5 billion to $3 billion 0.085%
$3 billion or more 0.075%
Gartmore China Opportunities Fund(1) $0 up to $500 million 0.625%
$500 million up to $2 billion 0.600%
$2 billion and more 0.575%
Gartmore Emerging Markets Fund(1) $0 up to $500 million 0.525%
$500 million up to $2 billion 0.50%
$2 billion and more 0.475%
Gartmore International Growth Fund(1) $0 up to $500 million 0.45%
$500 million up to $2 billion 0.425%
$2 billion and more 0.40%
81
|
Gartmore Worldwide Leaders Fund(1) $0 up to $500 million 0.45%
$500 million up to $2 billion 0.425%
$2 billion and more 0.40%
Gartmore Global Utilities Fund(1) $0 up to $500 million 0.35%
$500 million up to $2 billion 0.325%
$2 billion and more 0.30%
------------
|
1 The subadvisory fee at each breakpoint is a base subadvisory fee and actual fees may be higher or lower depending on the Fund's performance relative to its benchmark. If the Fund outperforms its benchmark by a set amount, GMFCT will pay higher subadvisory fees to GGP. Conversely, if the Fund underperforms its benchmark by a set amount, GMFCT will pay lower subadvisory fees to GGP.
SUBADVISER PERFORMANCE FEE -GARTMORE CHINA OPPORTUNITIES FUND, GARTMORE EMERGING
MARKETS FUND, GARTMORE INTERNATIONAL GROWTH FUND, GARTMORE WORLDWIDE LEADERS FUND, AND GARTMORE GLOBAL UTILITIES FUND
For the subadvisory services it provides to each of the Gartmore China Opportunities Fund, Gartmore Emerging Markets Fund, Gartmore International Growth Fund, Gartmore Worldwide Leaders Fund, and Gartmore Global Utilities Fund, GGP receives a base subadvisory fee that may be adjusted quarterly if the Fund outperforms or underperforms its stated benchmark(s) over the rolling 12 month performance period ending on the last day of such quarter as follows:
+/- 100 bps 2bps +/- 200 bps 4bps +/- 300 bps 6pbs +/- 400 bps 8pbs +/- 500 bps or more 10pbs |
As a result of the performance fee, the highest possible advisory fee at each breakpoint and lowest possible advisory fee at each breakpoint are as follows:
FUND BENCHMARK
---- ---------
Gartmore China Opportunities Fund MSCI Zhong Hau Index
------------------------------------------ ------------------ ------------------
HIGHEST POSSIBLE LOWEST POSSIBLE
BASE SUBADVISORY FEE SUBADVISORY FEE SUBADVISORY FEE
------------------------------------------ ------------------ ------------------
0.625% on assets up to $500 million 0.725% 0.525%
------------------------------------------ ------------------ ------------------
0.600% on assets of $500 million up to $2 0.700% 0.500%
billion
------------------------------------------ ------------------ ------------------
0.575% on assets of $2 billion and more 0.675% 0.475%
------------------------------------------ ------------------ ------------------
FUND BENCHMARK
---- ---------
Gartmore Emerging Markets Fund MSCI Emerging Markets Index
------------------------------------------ ------------------ ------------------
HIGHEST POSSIBLE LOWEST POSSIBLE
BASE SUBADVISORY FEE SUBADVISORY FEE SUBADVISORY FEE
------------------------------------------ ------------------ ------------------
0.525% on assets up to $500 million 0.625% 0.425%
------------------------------------------ ------------------ ------------------
0.50% on assets of $500 million up to $2 0.60% 0.40%
billion
------------------------------------------ ------------------ ------------------
0.475% on assets of $2 billion and more 0.575% 0.375%
------------------------------------------ ------------------ ------------------
|
FUND BENCHMARK
---- ---------
Gartmore International MSCI All Country World
Growth Fund Index Free ex US
------------------------------------------ ------------------ ------------------
HIGHEST POSSIBLE LOWEST POSSIBLE
BASE SUBADVISORY FEE SUBADVISORY FEE SUBADVISORY FEE
------------------------------------------ ------------------ ------------------
0.45% on assets up to $500 million 0.55% 0.35%
------------------------------------------ ------------------ ------------------
0.425% on assets of $500 million up to $2 0.525% 0.325%
billion
------------------------------------------ ------------------ ------------------
0.40% on assets of $2 billion and more 0.50% 0.30%
------------------------------------------ ------------------ ------------------
FUND BENCHMARK
---- ---------
Gartmore Worldwide Leaders Fund MSCI World Index
------------------------------------------ ------------------ ------------------
HIGHEST POSSIBLE LOWEST POSSIBLE
BASE SUBADVISORY FEE SUBADVISORY FEE SUBADVISORY FEE
------------------------------------------ ------------------ ------------------
0.45% on assets up to $500 million 0.55% 0.35%
------------------------------------------ ------------------ ------------------
0.425% on assets of $500 million up to $2 0.525% 0.325%
billion
------------------------------------------ ------------------ ------------------
0.40% on assets of $2 billion and more 0.50% 0.30%
------------------------------------------ ------------------ ------------------
FUND BENCHMARK
---- ---------
Gartmore Global Financial Services Fund MSCI World Financial Index
------------------------------------------ ------------------ ------------------
HIGHEST POSSIBLE LOWEST POSSIBLE
BASE SUBADVISORY FEE SUBADVISORY FEE SUBADVISORY FEE
------------------------------------------ ------------------ ------------------
0.45% on assets up to $500 million 0.55% 0.35%
------------------------------------------ ------------------ ------------------
0.425% on assets of $500 million up to $2 0.525% 0.325%
billion
------------------------------------------ ------------------ ------------------
0.40% on assets of $2 billion and more 0.50% 0.30%
------------------------------------------ ------------------ ------------------
FUND BENCHMARK
---- ---------
60% MSCI World Telecommunication
Gartmore Global Services Index / 40% MSCI World
Utilities Fund Utilities Index
------------------------------------------ ------------------ ------------------
HIGHEST POSSIBLE LOWEST POSSIBLE
BASE SUBADVISORY FEE SUBADVISORY FEE SUBADVISORY FEE
------------------------------------------ ------------------ ------------------
------------------------------------------ ------------------ ------------------
0.35% on assets up to $500 million 0.45% 0.25%
------------------------------------------ ------------------ ------------------
------------------------------------------ ------------------ ------------------
0.325% on assets of $500 million up to $2 0.425% 0.225%
billion
------------------------------------------ ------------------ ------------------
------------------------------------------ ------------------ ------------------
0.30% on assets of $2 billion and more 0.40% 0.20%
------------------------------------------ ------------------ ------------------
|
These fees are calculated at an annuate based on each Fund's average daily net assets.
During the fiscal years ended October 31, 2006, 2005, and 2004, GGP earned the following fees for subadvisory services:
-------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31,
-------------------------------------------- ----------- ----------- ----------
FUND 2006 2005 2004
-------------------------------------------- ----------- ----------- ----------
Gartmore China Opportunities Fund
-------------------------------------------- ----------- ----------- ----------
Gartmore Emerging Markets Fund 168,356 93,875
-------------------------------------------- ----------- ----------- ----------
Gartmore Global Utilities Fund 31,153 12,081
-------------------------------------------- ----------- ----------- ----------
Gartmore Global Financial Services Fund 0 27,186
-------------------------------------------- ----------- ----------- ----------
Gartmore International Growth Fund 50,909 32,947
-------------------------------------------- ----------- ----------- ----------
Gartmore Worldwide Leaders Fund 153,430 134,992
-------------------------------------------- ----------- ----------- ----------
|
A discussion regarding the basis for the Board of Trustees approval of the investment advisory contracts of the Funds is available in the Funds' semi-annual report to the shareholders for the six-month period ended April 30, 2007.
SUBADVISORY FEES PAID
The following table sets forth the amount GMFCT paid to the subadvisers for the fiscal periods ended October 31, 2006, 2005 and 2004 (unless otherwise noted):
Fund Year ended October 31,
2006 2005 2004
---- ---- ----
Gartmore Growth Fund 0 0 0
Gartmore China Opportunities Fund(1) 16,140 60,354 5,923
Gartmore Large Cap Value Fund 70,031 112,240 94,159
Gartmore U.S. Growth Leaders Long-Short Fund 0 0 182,528
Gartmore Small Cap Fund 0 0 42,309
Gartmore S&P 500 Index Fund 571,941 463,187 300,629
Gartmore Value Opportunities Fund 0 0 0
NorthPointe Small Cap Value Fund 0 0 0
Gartmore Small Cap Index Fund 363,619 250,025 147,394
Gartmore Mid Cap Market Index Fund 977,563 746,468 395,486
Gartmore International Index Fund 1,899,029 1,382,942 761,338
Gartmore Bond Index Fund 1,453,166 1,129,735 697,770
Gartmore Emerging Markets Fund(1) 28,584 168,356 93,875
Gartmore International Growth Fund(1) 19,445 50,909 32,947
Gartmore Worldwide Leaders Fund(1) 18,049 153,430 134,992
Gartmore Global Utilities Fund(1) 5,840 31,153 12,081
(1) NMRT was the Fund's adviser until September 29, 2006 when it transferred all
of its investment advisory responsibilities to GMFCT, its wholly-owned
subsidiary. Fees stated include those paid by NMRT.
|
MULTI-MANAGER STRUCTURE
GMFCT and the Trust have received from the SEC an exemptive order for the multi-manager structure which allows GMFCT to hire, replace or terminate unaffiliated subadvisers without the approval of shareholders; the order also allows GMFCT to revise a subadvisory agreement with an unaffiliated subadviser without shareholder approval. If a new unaffiliated subadviser is hired, the change will be communicated to shareholders within 90 days of such changes, and all changes will be approved by the Trust's Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust or GMFCT. The order is intended to facilitate the efficient operation of the Funds and afford the Trust increased management flexibility.
GMFCT provides investment management evaluation services to the Funds principally by performing initial due diligence on prospective subadvisers for the Fund and thereafter monitoring the performance of the subadviser through quantitative and qualitative analysis as well as periodic in-person, telephonic and written consultations with the subadviser. GMFCT has responsibility for communicating performance expectations and evaluations to the subadviser and ultimately recommending to the Trust's Board of Trustees whether the subadviser's contract should be renewed, modified or terminated; however, GMFCT
does not expect to recommend frequent changes of subadvisers. GMFCT will regularly provide written reports to the Trust's Board of Trustees regarding the results of its evaluation and monitoring functions. Although GMFCT will monitor the performance of the subadvisers, there is no certainty that the subadviser or the Fund will obtain favorable results at any given time.
DISTRIBUTOR
Gartmore Distribution Services, Inc. ("GDSI" or the "Distributor") serves as underwriter for each of the Funds in the continuous distribution of its shares pursuant to an Underwriting Agreement amended as of February 28, 2007 (the "Underwriting Agreement"). Unless otherwise terminated, the Underwriting Agreement will continue for an initial period of two years and from year to year thereafter for successive annual periods, if, as to each Fund, such continuance is approved at least annually by (i) the Trust's Board of Trustees or by the vote of a majority of the outstanding shares of that Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to the Underwriting Agreement or interested persons (as defined in the 1940 Act) of any party to the Underwriting Agreement, cast in person at a meeting called for the purpose of voting on such approval. The Underwriting Agreement may be terminated in the event of any assignment, as defined in the 1940 Act. GDSI is a wholly-owned subsidiary of Nationwide Asset Management, Inc. ("NAMI"), a Delaware holding company. NAMI is a wholly-owned subsidiary of Gartmore SA Capital Trust, which is an investment adviser and is wholly-owned by NWDIMI, a Delaware holding company. NWDIMI is a wholly owned, indirect subsidiary of NWD MRT. The following entities or people are affiliates of the Trust and are also affiliates of GDSI:
GMFCT
NWD MRT
Gartmore SA Capital Trust
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
Nationwide Corporation
Nationwide Mutual Insurance Company
John H. Grady
Michael A. Krulikowski
Gerald J. Holland
Eric E. Miller
In its capacity as Distributor, GDSI solicits orders for the sale of Shares, advertises and pays the costs of distribution, advertising, office space and the personnel involved in such activities. GDSI receives no compensation under the Underwriting Agreement with the Trust, but may retain all or a portion of the sales charge and 12b-1 fee, if any, imposed upon sales of shares of each of the Funds.
During the fiscal years ended October 31, 2006, 2005 and 2004 (unless otherwise noted), GDSI received the following commissions from the sale of shares of the Funds:
------------------------------------------------------------- -----------------------------------------------------
Funds Years ended October 31
------------------------------------------------------------- -----------------------------------------------------
------------------------------------------------------------- ------------------- ---------------- ----------------
2006 2005 2004
---- ---- ----
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Optimal Allocations Fund: Growth 7,739.56 $2,271.26 $0
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Optimal Allocations Fund: Moderate Growth 24,442.56 11,105.98 0
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Optimal Allocations Fund: Moderate 33,492.47 17,827.43 0
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Optimal Allocations Fund: Specialty 30,340.26 8,592.39 394.36
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Optimal Allocations Fund: Defensive(1) n/a n/a n/a
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Bond Fund 1,905.90 2,855.52 4,345.50
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore China Opportunities Fund 23,088.95 11,701.12 499.73
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Emerging Markets Fund 18,041.93 7,403.22 6,875.62
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Global Financial Services Fund 25,011.67 2,092.06 2,200.23
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Global Health Sciences Fund 1,756.80 1,756.66 2,060.15
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Global Natural Resources Fund 52,540.95 28,128.89 28.95
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Global Technology and Communications Fund 810.66 737.19 1,482.62
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
Gartmore Global Utilities Fund 3,809.28 2,486.86 1,170.62
------------------------------------------------------------- ------------------- ---------------- ----------------
------------------------------------------------------------- ------------------- ---------------- ----------------
85
|
Gartmore Government Bond Fund 1,879.75 2,416.45 7,521.88 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Growth Fund 10,681.72 15,191.46 13,441.61 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore International Growth Fund 19,046.61 1,195.07 285.02 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Investor Destinations Aggressive Fund 51,440.11 52,166.24 37,087.76 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Investor Destinations Moderately Aggressive Fund 95,770.57 97,971.02 90,810.67 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Investor Destinations Moderate Fund 78,286.98 101,146.99 77,946.46 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Investor Destinations Moderately Conservative Fund 24,246.15 38,094.98 29,581.49 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Investor Destinations Conservative Fund 11,462.75 18,803.55 11,678.84 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Large Cap Value Fund 3,315.35 3,850.44 3,135.91 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore U.S. Growth Leaders Long-Short Fund 9,217.38 8,021.01 3,331.63 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Micro Cap Equity Fund 4,844.44 42,048.76 75,850.03 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Mid Cap Growth Fund 1,881.68 1,251.51 1,740.31 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Mid Cap Growth Leaders Fund 2,019.45 2,335.98 1,916.98 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Short Duration Bond Fund 660.71 $1,800.98 $2,902.79 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Enhanced Income Fund 1,695.10 103.80 97.43 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Nationwide Fund 30,041.09 28,255.59 36,361.89 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Nationwide Leaders Fund 2,523.78 3,599.01 232.74 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Small Cap Fund 142,162.67 7,469.93 1,813.32 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Small Cap Leaders Fund 8,395.70 6,572.51 0 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Tax-Free Income Fund 10,205.47 10,648.26 13,314.02 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore U.S. Growth Leaders Fund 41,581.99 35,013.13 11,490.26 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Value Opportunities Fund 822.13 2,319.55 1,171.02 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Worldwide Leaders Fund 9,531.59 843.49 573.83 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Bond Index Fund 1,483.76 1,681.62 1,917.49 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore International Index Fund 479.43 383.62 1,623.92 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Mid Cap Market Index Fund 3,288.95 2,637.07 4,731.40 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore S&P 500 Index Fund 4,330.36 6,350.65 8,306.92 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- Gartmore Small Cap Index Fund 1,964.00 685.13 2,910.49 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- NorthPointe Small Cap Growth Fund 0 0 0 ------------------------------------------------------------- ------------------- ---------------- ---------------- ------------------------------------------------------------- ------------------- ---------------- ---------------- NorthPointe Small Cap Value Fund 0 0 0 ------------------------------------------------------------- ------------------- ---------------- ---------------- |
(1) The Gartmore Optimal Allocations Fund: Defensive commenced operations on December 15, 2006. GDSI also receives the proceeds of contingent deferred sales charges imposed on certain redemptions of Class B, Class C, Class X and Class Y shares (and certain Class A shares). During the fiscal years ended October 31, 2006, 2005 and 2004 (unless otherwise noted), GDSI received the following amounts from such sales charges:
---------------------------------------------------------------- --------------------------------------------------
Years ended October 31
---------------------------------------------------------------- --------------------------------------------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Funds 2006 2005 2004
----- ---- ---- ----
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore Optimal Allocations Fund: Growth 1,216.04 $199 $0
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore Optimal Allocations Fund: Moderate Growth 4,568.62 773 0
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore Optimal Allocations Fund: Moderate 9,615.56 2,040 0
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore Optimal Allocations Fund: Specialty 2,285.51 629 0
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore Optimal Allocations Fund: Defensive(1) n/a n/a n/a
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore Bond Fund 2,146.70 6,582 9,735
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore China Opportunities Fund 7,570.82 2,355 0
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
Gartmore Emerging Markets Fund 4,476.49 2,236 1,498
---------------------------------------------------------------- --------------- ----------------- ----------------
---------------------------------------------------------------- --------------- ----------------- ----------------
86
|
Gartmore Global Financial Services Fund 11,126.92 354 448 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Global Health Sciences Fund 910.19 869 551 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Global Natural Resources Fund 34,378.76 2,557 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Global Technology and Communications Fund 816.26 3,017 1,111 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Global Utilities Fund 221.23 1,102 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Government Bond Fund 174.53 $16,727 $23,235 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Growth Fund 7,910.67 13,609 11,062 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore International Growth Fund 4,797.96 442 9 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Investor Destinations Aggressive Fund 36,899.97 30,750 10,462 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Investor Destinations Moderately Aggressive Fund 75,184.79 64,859 26,687 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Investor Destinations Moderate Fund 67,053.64 58,334 28,434 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Investor Destinations Moderately Conservative Fund 17,791.15 19,951 17,090 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Investor Destinations Conservative Fund 18,714.33 15,292 12,717 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Large Cap Value Fund 3,513.97 1,498 1,088 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore U.S. Growth Leaders Long-Short Fund 5,632.36 2,655 543 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Micro Cap Equity Fund 14,717.21 34,867 41,101 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Mid Cap Growth Fund 63.79 349 91 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Mid Cap Growth Leaders Fund 7,419.21 8,423 11,877 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Money Market Fund 0 3,408 7,054 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Short Duration Bond Fund 0 20 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Enhanced Income Fund 0 0 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Nationwide Fund 38,657.60 49,695 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Nationwide Leaders Fund 508.38 231 334 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Tax-Free Income Fund 624.84 15,062 19,774 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore U.S. Growth Leaders Fund 29,293.61 10,281 14,986 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Value Opportunities Fund 3,265.70 6,556 6,765 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Worldwide Leaders Fund 1,119.94 281 59 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Bond Index Fund 1,780.38 3,532 664 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore International Index Fund 329.55 280 204 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Mid Cap Market Index Fund 603.57 1,343 534 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore S&P 500 Index Fund 15,086.05 10,400 13,020 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Small Cap Fund 24,596.69 3,743 2,739 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Small Cap Index Fund 1,623.02 877 290 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- Gartmore Small Cap Leaders Fund 1,310.87 47 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- NorthPointe Small Cap Growth Fund 0 0 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- ---------------------------------------------------------------- --------------- ----------------- ---------------- NorthPointe Small Cap Value Fund 0 0 0 ---------------------------------------------------------------- --------------- ----------------- ---------------- |
(1) The Gartmore Optimal Allocations Fund: Defensive commenced operations on December 15, 2006.
From such contingent deferred sales charges, GDSI retained $520,405, $397,885 and $335,775 for 2006, 2005 and 2004, respectively, after reallowances to dealers. GDSI reallows to dealers 5.00% of sales charges on Class A shares of the Funds which have a maximum front-end sales charge 5.75%, 4.00% of sales charges on Class A shares of the Funds which have a maximum front-end sales charge of 4.75%, 3.00% of sales charges on Class A shares of the Funds which have a maximum front-end sales charge of 3.75%, 4.00% on Class B and Class X shares of the Funds, 1.85% on Class C and Class Y shares of the Funds, 4.00% on Class D shares of the Funds.
DISTRIBUTION PLAN
The Funds have adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the 1940 Act with respect to certain classes of shares. The Plan permits the Funds to compensate GDSI, as the Funds' Distributor, for expenses associated with the distribution of certain classes of shares of the Funds. Although actual
distribution expenses may be more or less, under the Plan the Funds pay the distributor an annual fee in an amount that will not exceed the following amounts:
o 0.25% of the average daily net assets of Class A shares of each applicable Fund;
o 0.25% of the average daily net assets of Service Class shares and IRA Class shares of the Gartmore Short Duration Bond Fund;
o 0.75% of the average daily net assets of Class C shares of the Gartmore Short Duration Bond Fund;
o 0.25% of the average daily net assets of Service Class Shares of the Investor Destinations Funds;
o 1.00% of the average daily net assets of Class B and Class C shares for each applicable Fund other than the Gartmore Money Market Fund and the Gartmore Short Duration Bond Fund;
o 0.85% of the average daily net assets of the Class X and Class Y shares of the Gartmore Bond, Gartmore Government Bond and Gartmore Tax-Free Income Funds;
o 0.15% of the average daily net assets of Service Class shares of the Gartmore Money Market and S&P 500 Index Funds;
o 0.07% of the average daily net assets of the Local Fund shares of the Gartmore S&P 500 Index Fund; and
o 0.50% of the average daily net assets of the Class R Shares of each applicable Fund.
During the fiscal year ended October 31, 2006 (unless otherwise noted), GDSI earned the following distribution fees under the Plan(1):
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Fund Class A Class B Class C Class R Service Local
Class Class
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Optimal Allocations Fund: Growth $1,315 $1,560 $6,292 $4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Optimal Allocations Fund: Moderate
Growth 3,272 4,320 15,777 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Optimal Allocations Fund: Moderate 4,430 5,264 25,249 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Optimal Allocations Fund: Specialty 8,310 5,483 54,274 23 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Optimal Allocations Fund: Defensive(1) n/a n/a n/a n/a - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Bond Fund(2) 24,151 1,506 5,175 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore China Opportunities Fund 5,654 2,252 10,698 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Emerging Markets Fund 42,699 35,327 31,804 6 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Global Financial Services Fund $8,152 $11,664 $13,441 $4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Global Health Sciences Fund 21,735 12,222 31,633 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Global Natural Resources Fund 6,179 1,698 12,678 10 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Global Technology and Communications
Fund 7,496 10,153 654 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Global Utilities Fund 5,126 11,095 33,396 5 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Government Bond Fund(1) 136,734 1,470 2,512 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore Growth Fund 76,026 58,043 3,285 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
Gartmore International Growth Fund 10,778 30,952 1,445 4 - -
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
------------------------------------------------- ------------ ---------- ----------- ----------- ---------- -----------
88
|
Gartmore Investor Destinations Aggressive Fund 82,361 99,043 624,220 534 932,110 - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Investor Destinations Moderately Aggressive Fund 120,688 265,080 1,336,248 754 1,521,887 - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Investor Destinations Moderate Fund 119,973 249,031 1,322,932 436 1,643,645 - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Investor Destinations Moderately Conservative Fund 35,371 54,553 344,264 8 426,344 - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Investor Destinations Conservative Fund 33,550 38,207 175,059 9 309,303 - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Large Cap Value Fund 69,441 12,182 30,725 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore U.S. Growth Leaders Long-Short Fund 70,576 7,768 131,617 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Micro Cap Equity Fund 207,175 82,220 416,008 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Mid Cap Growth Fund 4,021 1,712 2,561 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Mid Cap Growth Leaders Fund 15,334 34,643 1,479 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Money Market Fund - - - - 5,474 - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Short Duration Bond Fund 2,137 - 5 - 298,231 - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Enhanced Income Fund 3,191 - - 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Nationwide Fund 437,556 347,283 9,403 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Nationwide Leaders Fund 8,947 5,874 10,051 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Tax-Free Income Fund(1) 23,508 5,446 11,849 - - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore U.S. Growth Leaders Fund 103,886 33,719 101,246 99 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Value Opportunities Fund 30,069 26,882 7,005 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Worldwide Leaders Fund 78,545 1,692 2,430 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Bond Index Fund 104,588 2,661 - - - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore International Index Fund 92,717 3,271 902 - - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Mid Cap Market Index Fund 304,298 7,636 986 - - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore S&P 500 Index Fund 34,264 54,479 6,786 - 856,730 79 ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Small Cap Fund 68,947 17,723 12,025 396 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Small Cap Index Fund 180,141 3,890 994 - - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- Gartmore Small Cap Leaders Fund 7,193 3,131 32,350 3 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- NorthPointe Small Cap Growth Fund 4 11 11 4 - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- NorthPointe Small Cap Value Fund - - - - - - ------------------------------------------------- ------------ ---------- ----------- ----------- ---------- ----------- |
---------------------------------------- ---------------- ----------------
Funds Class X Class Y
---------------------------------------- ---------------- ----------------
---------------------------------------- ---------------- ----------------
Gartmore Bond Fund 27,421 1,877
---------------------------------------- ---------------- ----------------
---------------------------------------- ---------------- ----------------
Gartmore Government Bond Fund 33,899 7,698
---------------------------------------- ---------------- ----------------
---------------------------------------- ---------------- ----------------
Gartmore Tax-Free Income Fund 49,286 3,406
---------------------------------------- ---------------- ----------------
IRA Class Shares
Gartmore Short Duration Bond Fund $252,520
|
Effective December 27, 2004 the Gartmore Short Duration Bond Fund ceased offering IRA Class shares to new investors.
As required by Rule 12b-1, the Plan was approved by the Board of Trustees, including a majority of the Trustees who are not interested persons of the Funds and who have no direct or indirect financial interest in the operation of the Plan (the "Independent Trustees"). The Plan was initially approved by the Board
of Trustees on March 5, 1998, and is amended from time to time upon approval by the Board of Trustees. The Plan may be terminated as to a Class of a Fund by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding shares of that Class. Any change in the Plan that would materially increase the distribution cost to a Class requires shareholder approval. The Trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. The Plan may be amended by vote of the Trustees including a majority of the Independent Trustees, cast in person at a meeting called for that purpose. For so long as the Plan is in effect, selection and nomination of those Trustees who are not interested persons of the Trust shall be committed to the discretion of such disinterested persons. All agreements with any person relating to the implementation of the Plan may be terminated at any time on 60 days' written notice without payment of any penalty, by vote of a majority of the Independent Trustees or by a vote of the majority of the outstanding Shares of the applicable Class. The Plan will continue in effect for successive one-year periods, provided that each such continuance is specifically approved (i) by the vote of a majority of the Independent Trustees, and (ii) by a vote of a majority of the entire Board of Trustees cast in person at a meeting called for that purpose. The Board of Trustees has a duty to request and evaluate such information as may be reasonably necessary for them to make an informed determination of whether the Plan should be implemented or continued. In addition the Trustees in approving the Plan as to a Fund must determine that there is a reasonable likelihood that the Plan will benefit such Fund and its Shareholders.
The Board of Trustees of the Trust believes that the Plan is in the best interests of the Funds since it encourages Fund growth and maintenance of Fund assets. As the Funds grow in size, certain expenses, and therefore total expenses per share, may be reduced and overall performance per share may be improved.
GDSI has entered into, and will enter into, from time to time, agreements with selected dealers pursuant to which such dealers will provide certain services in connection with the distribution of a Fund's shares including, but not limited to, those discussed above. GDSI or an affiliate of GDSI pays additional amounts from its own resources to dealers or other financial intermediaries, including its affiliate, Nationwide Financial Services, Inc. or its subsidiaries, for aid in distribution or for aid in providing administrative services to shareholders.
The Trust has been informed by GDSI that during the fiscal year ended October 31, 2006, the following expenditures were made using the 12b-1 fees received by GDSI with respect to the Funds:
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Fund Prospectus Distributor Financing Broker-Dealer
Charges with
Printing & Compensation & Respect to B & C Compensation &
Mailing(1) Costs(1) Shares Costs
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Bond Fund $497.49 $1,379.94 $23,541.68 $34,743.89
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Emerging Markets Fund 14,202.48 3,374.01 78,164.62 111,966.89
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Global Financial Services Fund 19,213.23 1,327.43 39,663.67 27,906.67
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Global Health Sciences Fund 3,918.37 562.55 25,148.59 52,069.49
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Global Technology and Communications
Fund 3,364.33 793.72 9,714.51 6,357.44
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Global Utilities Fund 13,931.86 196.11 18,077.44 17,741.59
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Government Bond Fund 4,048.83 1,033.50 36,526.72 133,819.95
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Growth Fund 25,762.39 2,051.57 15,555.59 79,876.45
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore International Growth Fund 19,890.90 1,655.50 75,805.65 28,456.95
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Investor Destinations Aggressive Fund
0 2,429.78 360,186.34 2,134,163.48
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Investor Destinations Moderately
Aggressive Fund 0 2,263.15 772,494.42 3,821,729.79
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Investor Destinations Moderate Fund
0 3,878.90 765,920.40 4,055,283.59
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Investor Destinations Moderately
Conservative Fund 0 1,824.76 183,259.24 909,202.06
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Investor Destinations Conservative
Fund 0 24,567.52 84,816.04 545,961.70
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
90
|
Gartmore Large Cap Value Fund 0 1,269.96 37,507.65 98,527.61
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore U.S. Growth Leaders Long-Short Fund
0 16,320.46 178,848.88 225,528.93
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Micro Cap Equity Fund 0 6,979.71 95,033.28 544,072.41
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Mid Cap Growth Fund 0 1,802.50 3,776.10 6,405.04
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Mid Cap Growth Leaders Fund 1.09 567.36 31,528.97 26,087.58
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Money Market Fund 3,321.86 91.67 0 6,586.47
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Short Duration Bond Fund 0 7,836.61 143.15 249,202.17
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Enhanced Income Fund 32.43 86.15 0 4,588.42
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Nationwide Fund 0 12,646.56 189,866.95 343,341.04
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Nationwide Leaders Fund 5,694.14 1,798.56 22,918.00 21,627.30
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Small Cap Fund 0 1,728.99 476,153.92 328,796.92
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Tax-Free Income Fund 2,421.01 2,396.79 35,035.72 38,707.48
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore U.S. Growth Leaders Fund 0 2,241.68 308,341.05 364,790.34
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Value Opportunities Fund 0 1,385.30 20,476.01 43,210.41
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Worldwide Leaders Fund 98.43 48,360.87 23,848.42 50,612.28
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Bond Index Fund 0 712.31 1,585.62 106,098.51
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore International Index Fund 0 1,230.85 6,588.12 157,372.29
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Mid Cap Market Index Fund 0 433.87 11,669.46 466,849.34
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore S&P 500 Index Fund 48,162.69 9,067.57 10,669.28 977,671.46
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Small Cap Index Fund 0 758.87 5,424.72 217,826.96
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore China Opportunities Fund 0 1,226.48 27,984.20 25,337.31
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Global Natural Resources Fund 1,562.82 1,242.57 99,570.23 64,978.38
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Small Cap Leaders Fund 0 194.03 60,410.94 63,976.85
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Optimal Allocations Fund: Growth
0 181.49 33,881.54 15,598.78
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Optimal Allocations Fund: Moderate
Growth 0 56.18 92,999.86 42,178.86
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Optimal Allocations Fund: Moderate
0 40.02 115,211.27 49,904.39
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Optimal Allocations Fund: Specialty
0 397.44 168,287.60 95,616.42
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Optimal Allocations Fund: Defensive(2) n/a n/a n/a n/a
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
NorthPointe Small Cap Growth Fund 25.45 0.36 9.97 31.22
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
Gartmore Small Cap Growth Fund 40.61 32.15 205.85 154.39
------------------------------------------------ ---------------- -------------------- ------------------ ----------------
|
(1) Printing and mailing of prospectuses to other than current Fund shareholders. (2) The Gartmore Optimal Allocations Fund: Defensive commenced operations on December 15, 2006.
ADMINISTRATIVE SERVICES PLAN
Under the terms of an Administrative Services Plan, a Fund is permitted to enter into Servicing Agreements with servicing organizations, such as broker-dealers and financial institutions, who agree to provide certain administrative support services in connection with the Class A, Class D, Class R, Institutional Service Class and Service Class shares of the Funds (as applicable), the Prime shares of the Money Market Fund, and the IRA Class shares of the Short Duration Bond Fund. Such administrative support services include, but are not limited to, the following: establishing and maintaining shareholder accounts, processing purchase and redemption transactions, arranging for bank wires, performing shareholder sub-accounting, answering inquiries regarding the Funds, providing periodic statements showing the account balance for beneficial owners or for plan participants or contract holders of insurance company separate accounts, transmitting proxy statements, periodic reports, updated prospectuses and other communications to shareholders and, with respect to meetings of shareholders, collecting, tabulating and forwarding to the Trust
executed proxies and obtaining such other information and performing such other services as may reasonably be required. With respect to the Class R shares, these types of administrative support services will be exclusively provided for retirement plans and their plan participants.
As authorized by the particular Administrative Services Plan(s) for the Funds, the Trust has entered into Servicing Agreements for the Funds pursuant to which Nationwide Financial Services, Inc. ("NFS") has agreed to provide certain administrative support services in connection with the applicable Fund shares held beneficially by its customers. NFS is a majority owned subsidiary of Nationwide Corporation, which also owns NWDIMI. In consideration for providing administrative support services, NFS and other entities with which the Trust may enter into Servicing Agreements (which may include GDSI) will receive a fee, computed at the annual rate of up to 0.25%, 0.25% and 0.15% of the average daily net assets of the Class A, D, R or Institutional Service and Service Class shares, respectively, of each Fund (as applicable), Prime shares of the Money Market Fund and IRA Class shares of the Gartmore Short Duration Bond Fund.
The Trust has also entered into a Servicing Agreement pursuant to which Nationwide Investment Services Corporation ("NISC") has agreed to provide certain administrative support services in connection with Service Class shares of the Money Market Fund held beneficially by its customers. NISC is indirectly owned by NFS.
During the fiscal year ended October 31, 2006, NFS and its affiliates received $7,108,996 in administrative services fees from the Funds.
FUND ADMINISTRATION AND TRANSFER AGENCY SERVICES
Under the terms of a Fund Administration and Transfer Agency Agreement, Gartmore SA Capital Trust ("GSA"), a wholly-owned subsidiary of NWDIMI, provides various administrative and accounting services, including daily valuation of the Funds' shares, preparation of financial statements, tax returns, and regulatory reports, and presentation of quarterly reports to the Board of Trustees. NWDIMI is a wholly-owned, indirect subsidiary of Nationwide Corp. Gartmore Investors Services Inc. ("GISI"), an indirect subsidiary of GSA, serves as transfer agent and dividend disbursing agent for each of the Funds. Both GSA and GISI are located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428. For the fund administration and transfer agency services, each Fund pays GSA and GISI a combined annual fee based on the Trust's average daily net assets according to the following schedule:
ASSET LEVEL(1) AGGREGATE TRUST FEE
-------------- -------------------
$0 up to $1 billion 0.26%
$1 billion up to $3 billion 0.19%
$3 billion up to $4 billion 0.15%
$4 billion up to $5 billion 0.08%
$5 billion up to $10 billion 0.05%
$10 billion up to $12 billion 0.03%
$12 billion and more 0.02%
------------
|
(1) The assets of each of the Funds of Funds are excluded from the Trust asset level amount in order to calculate this asset based fee. The Funds of Funds do not pay any part of this fee.
During the fiscal years ended October 31, 2006, October 31, 2005 and October 31, 2004, GSA and GISI were paid combined fund administration and transfer agency fees from the Funds as follows:
YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
FUND 2006 2005 2004
---- ---------------- ---------------- ----------------
Gartmore Optimal Allocations Fund: Growth $ 0 $ 0 $ 0
Gartmore Optimal Allocations Fund: Moderate 0 0 0
Growth
Gartmore Optimal Allocations Fund: Moderate 0 0 0
|
Year Ended Year Ended Period Ended
Fund October 31, 2006 October 31, 2005 October 31, 2004
----
Gartmore Optimal Allocations Fund: Specialty 0 0 0
Gartmore Optimal Allocations Fund: Defensive(1) n/a n/a n/a
Gartmore Bond Fund 135,261 158,706 190,448
Gartmore China Opportunities Fund 41,879 57,424 7,535 (2)
Gartmore Emerging Markets Fund 83,519 33,542 38,320
Gartmore Global Financial Services Fund 46,910 56,788 13,020
Gartmore Global Health Sciences Fund 35,639 25,060 17,434
Gartmore Global Natural Resources Fund 69,775 29,644 2,937 (2)
Gartmore Global Technology and Communications 13,664 13,185 15,818
Fund
Gartmore Global Utilities Fund 25,790 $28,213 $11,937
Gartmore Government Bond Fund 166,159 207,288 246,159
Gartmore Growth Fund 293,008 327,352 461,978
Gartmore International Growth Fund 50,244 30,230 18,401
Gartmore Investor Destinations Aggressive Fund 0 0 0
Gartmore Investor Destinations Moderately 0 0 0
Aggressive Fund
Gartmore Investor Destinations Moderate Fund 0 0 0
Gartmore Investor Destinations Moderately 0 0 0
Conservative Fund
Gartmore Investor Destinations Conservative 0 0 0
Fund
Gartmore Large Cap Value Fund 46,268 42,524 36,584
Gartmore U.S. Growth Leaders Long-Short Fund 126,831 89,592 67,760
Gartmore Micro Cap Equity Fund 177,673 268,601 141,792
Gartmore Mid Cap Growth Fund 9,768 8,528 7,629
Gartmore Mid Cap Growth Leaders Fund 50,188 52,342 48,665
Gartmore Money Market Fund 1,608,440 1,780,215 1,914,475
Gartmore Short Duration Bond Fund 123,973 294,439 947,252
Gartmore Enhanced Income Fund 490,246 427,947 270,039
Gartmore Nationwide Fund 1,503,448 1,774,267 2,742,272
Gartmore Nationwide Leaders Fund 17,830 15,321 8,563
Gartmore Tax-Free Income Fund 193,895 235,524 265,269
Gartmore U.S. Growth Leaders Fund 247,069 96,852 46,808
Gartmore Value Opportunities Fund 25,762 33,999 61,708
Gartmore Worldwide Leaders Fund 73,067 68,428 92,537
Gartmore Bond Index Fund 1,834,781 1,487,803 916,592
Gartmore International Index Fund 1,760,495 1,427,578 760,263
Gartmore Mid Cap Market Index Fund 1,157,946 921,691 475,566
Gartmore S&P 500 Index Fund 2,964,738 2,523,149 1,613,497
Gartmore Small Cap Fund 273,987 42,812 63,688
Gartmore Small Cap Index Fund 527,296 422,548 258,187
Gartmore Small Cap Leaders Fund 41,660 16,711 -
NorthPointe Small Cap Growth Fund 49,476 62,861 1,357(3)
NorthPointe Small Cap Value Fund 29,495 34,784 40,938
|
(1) The Gartmore Optimal Allocations Fund: Defensive commenced operations on December 15, 2006. (2) The Fund commenced operations on June 29, 2004.
SUB-ADMINISTRATORS
GSA and GISI have entered into a Services Agreement with BISYS Fund Services Ohio, Inc. ("BISYS"), effective November 1, 2001, to provide certain fund administration and transfer agency services for each of the Funds. For these services, GSA pays BISYS an annual fee at the following rates based on the average daily net assets of the aggregate of all the Funds of the Trust that BISYS is providing such services for:
ASSET LEVEL(1) FEE
-------------- ---
$0 up to $1 billion 0.20%
$1 billion up to $3 billion 0.15%
$3 billion up to $4 billion 0.10%
$4 billion up to $5 billion 0.05%
$5 billion up to $10 billion 0.02%
$10 billion up to $12 billion 0.01%
$12 billion or more 0.005%
|
(1) The assets of each of the Funds of Funds are excluded from the Trust asset level amount in order to calculate this asset based fee.
BISYS received the following amounts for the sub-administration services and sub-transfer agency services it provided:
2006 2005 2004 ----------- ----------- ----------- $7,776,120 $7,590,231 $7,392,323 |
CUSTODIAN
JPMorgan Chase Bank, 270 Park Avenue, New York, New York 10017, is the custodian for the Funds and makes all receipts and disbursements under a Custody Agreement.
LEGAL COUNSEL
Stradley Ronon Stevens and Young LLP, 2600 One Commerce Square, Philadelphia, Pennsylvania 19103, serves as the Trust's legal counsel.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1700, 2001 Market Street, Philadelphia, PA 19103-7042, serves as the Independent Registered Public Accounting Firm for the Trust.
BROKERAGE ALLOCATION
A Fund's adviser (or a subadviser) is responsible for decisions to buy and sell securities and other investments for the Funds, the selection of brokers and dealers to effect the transactions and the negotiation of brokerage
commissions, if any.(1) In transactions on stock and commodity exchanges in the United States, these commissions are negotiated, whereas on foreign stock and commodity exchanges these commissions are generally fixed and are generally higher than brokerage commissions in the United States. In the case of securities traded on the over-the-counter markets or for securities traded on a principal basis, there is generally no commission, but the price includes a spread between the dealer's purchase and sale price. This spread is the dealer's profit. In underwritten offerings, the price includes a disclosed, fixed commission or discount. Most short term obligations are normally traded on a "principal" rather than agency basis. This may be done through a dealer (e.g., a securities firm or bank) who buys or sells for its own account rather than as an agent for another client, or directly with the issuer.
Except as described below, the primary consideration in portfolio security transactions is best price and execution of the transaction i.e., execution at the most favorable prices and in the most effective manner possible. "Best price-best execution" encompasses many factors affecting the overall benefit obtained by the client account in the transaction including, but not necessarily limited to, the price paid or received for a security, the commission charged, the promptness, availability and reliability of execution, the confidentiality and placement accorded the order, and customer service. Therefore, "best price-best execution" does not necessarily mean obtaining the best price alone but is evaluated in the context of all the execution services provided. Both the adviser and the subadvisers have complete freedom as to the markets in and the broker-dealers through which they seek this result.
Subject to the primary consideration of seeking best price-best execution and as discussed below, securities may be bought or sold through broker-dealers who have furnished statistical, research, and other information or services to the adviser or a subadviser. In placing orders with such broker-dealers, the adviser or subadviser will, where possible, take into account the comparative usefulness of such information. Such information is useful to the adviser or subadviser even though its dollar value may be indeterminable, and its receipt or availability generally does not reduce the adviser's or subadviser's normal research activities or expenses.
There may be occasions when portfolio transactions for a Fund are executed as part of concurrent authorizations to purchase or sell the same security for trusts or other accounts (including other mutual funds) served by the adviser or subadviser or by an affiliated company thereof. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to a Fund, they are affected only when the adviser or subadviser believes that to do so is in the interest of the Fund. When such concurrent authorizations occur, the executions will be allocated in an equitable manner.
In purchasing and selling investments for the Funds, it is the policy of each of the advisers and subadvisers to obtain best execution at the most favorable prices through responsible broker-dealers. The determination of what may constitute best execution in a securities transaction by a broker involves a number of considerations, including the overall direct net economic result to the Fund (involving both price paid or received and any commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction at all when a large block is involved, the availability of the broker to stand ready to execute possibly difficult transactions in the future, the professionalism of the broker, and the financial strength and stability of the broker. These considerations are judgmental and are weighed by the adviser or subadviser in determining the overall reasonableness of securities executions and commissions paid. In selecting broker-dealers, the adviser or subadviser will consider various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security or asset to be purchased or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer's firm; the broker-dealer's execution services, rendered on a continuing basis; and the reasonableness of any commissions.
The advisers and each subadviser may cause a Fund to pay a broker-dealer who furnishes brokerage and/or research services a commission that is in excess of the commission another broker-dealer would have received for executing the transaction if it is determined, pursuant to the requirements of Section 28(e) of the Securities Exchange Act of 1934, that such commission is reasonable in relation to the value of the brokerage and/or research services provided. Such research services may include, among other things, analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, analytic or modeling software, market data feeds and historical market information. Any such research and other information provided
(1) Because the Funds of Funds will invest primarily in shares of the Underlying Funds and the Nationwide Contract, it is expected that all transactions in portfolio securities for these Funds will be entered into by the Underlying Funds.
by brokers to an adviser or subadviser is considered to be in addition to and not in lieu of services required to be performed by it under its investment advisory or subadvisory agreement, as the case may be. The fees paid to the advisers and subadvisers pursuant to their respective investment advisory or subadvisory agreement are not reduced by reason of its receiving any brokerage and research services. The research services provided by broker-dealers can be useful to the advisers or a subadviser in serving their other clients. All research services received from the brokers to whom commission are paid are used collectively, meaning such services may not actually be utilized in connection with each client account that may have provided the commission paid to the brokers providing such services. The advisers and subadvisers are prohibited from considering the broker-dealers sale of shares of any fund for which it serves as investment adviser or subadviser, except as may be specifically permitted by law.
Fund portfolio transactions may be effected with broker-dealers who have assisted investors in the purchase of variable annuity contracts or variable insurance policies issued by Nationwide Life Insurance Company or Nationwide Life & Annuity Insurance Company. However, neither such assistance nor sale of other investment company shares is a qualifying or disqualifying factor in a broker-dealer's selection, nor is the selection of any broker-dealer based on the volume of shares sold.
For the fiscal year ended October 31, 2006, the clients (including the Funds) of all the affiliated advisers of NWD IMI, including but not limited to GMFCT, GSA, NWD MRT, and GMCM, paid soft dollar commissions in the total amount of $1.9 million with respect to the Funds and $7.1 million with respect to all the clients of all the affiliated advisers of NWDIMI. NWDIMI directs security transactions to brokers providing brokerage and research services to the benefit of all NWDIMI clients, including the Funds.
During the fiscal years ended October 31, 2006, 2005 and 2004, the following brokerage commissions were paid by the Funds:
------------------------------------------------------------------ ----------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------ ----------------------------------------
FUND 2006 2005 2004
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Optimal Allocations Fund: Growth $ 527 $ 48 $ 16
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Optimal Allocations Fund: Moderate Growth 822 156 16
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Optimal Allocations Fund: Moderate 526 321 21
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Optimal Allocations Fund: Specialty 1,971 670 42
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Optimal Allocations Fund: Defensive 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Bond Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore China Opportunities Fund 145,087 69,100 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Emerging Markets Fund 406,511 273,516 153,047
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Global Financial Services Fund 191,160 59,677 20,505
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Global Health Sciences Fund 145,110 166,805 119,713
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Global Natural Resources Fund 241,777 75,641
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Global Technology and Communications Fund 156,772 300,153 367,076
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Global Utilities Fund 39,874 70,496 47,852
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Government Bond Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Growth Fund 1,368,535 1,667,028 2,348,087
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore International Growth Fund 195,007 94,036 70,939
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Investor Destinations Aggressive Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Investor Destinations Moderately Aggressive Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Investor Destinations Moderate Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Investor Destinations Moderately Conservative Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Investor Destinations Conservative Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Large Cap Value Fund 54,821 32,471 27,285
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore U.S. Growth Leaders Long-Short Fund 1,902,197 1,097,907 579,983
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Micro Cap Equity Fund 748,352 1,037,549 832,903
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Mid Cap Growth Fund 9,051 7,038 8,950
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Mid Cap Growth Leaders Fund 139,940 116,941 254,995
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Short Duration Bond Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Enhanced Income Fund 10,892 15,917 35,824
------------------------------------------------------------------ ---------- ---------- ----------
|
------------------------------------------------------------------ ----------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------ ----------------------------------------
FUND 2006 2005 2004
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Nationwide Fund 5,518,379 4,391,294 6,403,579
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Nationwide Leaders Fund 142,040 126,334 24,770
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Small Cap Fund 2,565,948 441,403 742,393
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Tax-Free Income Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore U.S. Growth Leaders Fund 1,168,315 655,159 447,511
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Value Opportunities Fund 91,526 155,965 251,939
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Worldwide Leaders Fund 364,130 352,648 563,970
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Bond Index Fund 0 0 0
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore International Index Fund 235,354 231,403 333,927
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Mid Cap Market Index Fund 229,209 170,594 221,126
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore S&P 500 Index Fund 19,816 39,914 76,589
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Small Cap Index Fund 190,815 71,950 143,350
------------------------------------------------------------------ ---------- ---------- ----------
Gartmore Small Cap Leaders Fund 435,618 177,151
------------------------------------------------------------------ ---------- ---------- ----------
NorthPointe Small Cap Growth Fund 190,430 308,538 48,226
------------------------------------------------------------------ ---------- ---------- ----------
NorthPointe Small Cap Value Fund 164,920 198,509 223,426
------------------------------------------------------------------ ---------- ---------- ----------
|
During the fiscal year ended October 31, 2006, the Gartmore Bond Fund, Gartmore Bond Index Fund, Gartmore Growth Fund, Gartmore Global Financial Services Fund, Gartmore Large Cap Value Fund, Gartmore U.S. Growth Leaders Long-Short Fund, Gartmore Money Market Fund, Gartmore Short Duration Bond Fund, Gartmore Enhanced Income Fund, Gartmore Nationwide Fund, Gartmore U.S. Growth Leaders Fund, Gartmore Nationwide Leaders Fund, Gartmore International Index Fund, Gartmore Mid Cap Market Index Fund, and Gartmore S&P 500 Index Fund held investments in securities of their regular broker-dealers as follows:
APPROXIMATE AGGREGATE
VALUE OF ISSUER'S
SECURITIES OWNED BY THE
FUND AS OF
FISCAL YEAR END NAME OF
FUND OCTOBER 31, 2006 BROKER OR DEALER
---- ------------------------ -----------------
Gartmore Bond Fund $1,924,253 Merrill Lynch & Co., Inc.
2,069,901 JPMorgan Chase & Co., Inc.
Gartmore Bond Index Fund 1,965,892 Prudential Financial, Inc.
12,651,367 CS First Boston Corp.
12,168,852 Lehman Brothers Holdings, Inc.
11,244,677 Citigroup
75,024,129 JP Morgan Chase & Co., Inc.
10,077,443 Wachovia Corp.
11,433,302 Bank of America Corp.
Gartmore Enhanced Income Fund 4,943,440 Merrill Lynch & Co., Inc.
5,777,275 CS First Boston Corp.
11,116,534 Citigroup
5,249,384 JP Morgan Chase & Co., Inc.
2,830,173 Wachovia Corp.
6,996,227 Bank of America Corp.
Gartmore Global Financial Services Fund 774,685 Prudential Financial, Inc.
557,319 CS First Boston Corp.
639,066 Lehman Brothers Holdings, Inc.
1,213,370 Citigroup
1,492,395 Wachovia Corp.
1,591,320 Bank of America Corp.
|
APPROXIMATE AGGREGATE
VALUE OF ISSUER'S
SECURITIES OWNED BY THE
FUND AS OF
FISCAL YEAR END NAME OF
FUND OCTOBER 31, 2006 BROKER OR DEALER
---- ------------------------ -----------------
Gartmore Global Health Sciences Fund 453,639 CS First Boston Corp.
Gartmore Global Natural Resources Fund 2,306,614 CS First Boston Corp.
Gartmore Global Technology and
Communications Fund 67,698 CS First Boston Corp.
Gartmore Global Utilities Fund 143,934 CS First Boston Corp.
Gartmore Government Bond Fund 383,174 CS First Boston Corp.
Gartmore Growth Fund 1,206,262 Prudential Financial, Inc.
1,393,336 Lehman Brothers Holdings, Inc.
2,058,495 Wachovia Corp.
2,500,000 Bank of America Corp.
Gartmore International Growth Fund 579,014 Prudential Financial Corp.
Gartmore International Index Fund 10,000,000 Merrill Lynch & Co., Inc.
5,046,389 Prudential Financial, Inc.
15,936,062 CS First Boston Corp.
25,000,000 Citigroup
16,000,000 Wachovia Corp.
16,300,000 Bank of America Corp.
Gartmore Large Cap Value Fund 166,098 Merrill Lynch & Co., Inc.
639,436 CS First Boston Corp.
925,954 Citigroup
577,200 Wahcovia Corp.
1,143,014 Bank of America Corp.
Gartmore Micro Cap Equity Fund 1,500,075 CS First Boston Corp.
3,000,000 Citigroup
2,000,000 Bank of America Corp.
Gartmore Mid Cap Growth Fund 51,886 CS First Boston Corp.
Gartmore Mid Cap Growth Leaders Fund 2,142,014 Bank of America Corp.
Gartmore Mid Cap Market Index Fund 20,000,000 Merrill Lynch & Co., Inc.
84,321,768 CS First Boston Corp.
24,900,600 Citigroup
12,000,000 Wachovia Corp.
73,871,301 Bank of America Corp.
|
APPROXIMATE AGGREGATE
VALUE OF ISSUER'S
SECURITIES OWNED BY THE
FUND AS OF
FISCAL YEAR END NAME OF
FUND OCTOBER 31, 2006 BROKER OR DEALER
---- ------------------------ -----------------
Gartmore Nationwide Fund 4,773,219 Merrill Lynch & Co., Inc.
6,889,082 Prudential Financial, Inc.
11,267,340 Lehman Brothers Holdings, Inc.
9,689,758 Citigroup
28,392,937 Bank of America Corp.
Gartmore Nationwide Leaders Fund 219,744 CS First Boston Corp.
Gartmore S&P 500 Index Fund 21,050,299 Merrill Lynch & Co., Inc.
10,419,630 Prudential Finanical, Inc.
31,769,755 CS First Boston Corp.
37,364,278 Citigroup
29,179,014 Wachovia Corp.
66,231,064 Bank of America Corp.
Gartmore Short Duration Bond Fund 1,470,081 Merrill Lynch & Co., Inc.
2,589,623 CS First Boston Corp.
2,952,579 Citigroup
3,000,000 Wachovia Corp.
Gartmore Small Cap Fund 16,883,111 CS First Boston Corp.
Gartmore Small Cap Index Fund 10,000,000 Merrill Lynch & Co., Inc.
55,921,122 CS First Boston Corp.
775,374 Knight Securities, LP
10,000,000 Citigroup
5,000,000 Wachovia Corp.
11,500,000 Bank of America Corp.
Gartmore Small Cap Value Fund 26,965 CS First Boston Corp.
Gartmore U.S. Growth Leaders Fund 1,352,517 CS First Boston Corp.
3,764,565 Wachovia Corp.
6,017,804 Bank of America Corp.
Gartmore U.S. Growth Leaders Long-Short Fund 12,975,620 CS First Boston Corp.
Gartmore Value Opportunities Fund 197,712 CS First Boston Corp.
1,000,000 Bank of America Corp.
Gartmore Worldwide Leaders Fund 1,024,500 Bank of America Corp.
Northpointe Small Cap Growth Fund 1,622,821 CS First Boston Corp.
Northpointe Small Cap Value Fund 632,812 CS First Boston Corp.
|
Under the 1940 Act, "affiliated persons" of a Fund are prohibited from dealing with it as a principal in the purchase and sale of securities unless an exemptive order allowing such transactions is obtained from the SEC. However, each Fund may purchase securities from underwriting syndicates of which a Subadviser or any of its affiliates, as defined in the 1940 Act, is a member under certain conditions, in accordance with Rule 10f-3 under the 1940 Act.
Each of the Funds contemplate that, consistent with the policy of obtaining best results, brokerage transactions may be conducted through "affiliated brokers or dealers," as defined in the 1940 Act. Under the 1940 Act, commissions paid by a Fund to an "affiliated broker or dealer" in connection with a purchase or sale of securities offered on a securities exchange may not exceed the usual and customary broker's commission. Accordingly, it is the Funds' policy that the commissions to be paid to an affiliated broker-dealer must, in the judgment of the adviser or the appropriate subadviser, be (1) at least as favorable as those that would be charged by other brokers having comparable execution capability and (2) at least as favorable as commissions contemporaneously charged by such broker or dealer on comparable transactions for the broker's or dealer's most favored unaffiliated customers. The advisers and subadvisers do not deem it practicable or in the Funds' best interests to solicit competitive bids for commissions on each transaction. However, consideration regularly is given to information concerning the prevailing level of commissions charged on comparable transactions by other brokers during comparable periods of time.
During the fiscal years ended October 31, 2005 and 2004, the following brokerage commissions were paid by the Funds to affiliated brokers:
COMMISSIONS PAID TO AFFILIATED BROKERS
---------------------------------------
FUND BROKER 2005 2004
Gartmore S&P 500 Index Fund Merrill Lynch $420 $0
--------------------------------------------------------------------------------
Gartmore Small Cap Index Fund Merrill Lynch $ 387 $ 0
Gartmore International Index Fund Merrill Lynch $ 0 $327
Gartmore Mid Cap Market
Index Fund Merrill Lynch $2,191 $ 0
--------------------------------------------------------------------------------
|
The table below shows the amount of brokerage commissions paid by the Funds to affiliated brokers, and the percentage of such Fund's total brokerage commissions that were paid to each affiliated broker, during the fiscal year ended October 31, 2006.
--------------------------------------------- --------------------- ------------------------ ----------------------
PERCENT OF THE
AGGREGATE
COMMISSIONS PAID BY
FUND AFFILIATED BROKER COMMISSION ($) THE FUND (%)
--------------------------------------------- --------------------- ------------------------ ----------------------
Gartmore International Index Fund Merrill Lynch 27.78 0.01%
--------------------------------------------- --------------------- ------------------------ ----------------------
Gartmore Mid Cap Market Index Fund Merrill Lynch 50,245.40 21.92%
--------------------------------------------- --------------------- ------------------------ ----------------------
Gartmore S&P 500 Index Fund Merrill Lynch 50.00 0.25%
--------------------------------------------- --------------------- ------------------------ ----------------------
|
ADDITIONAL INFORMATION ON PURCHASES AND SALES
CLASS A AND CLASS D SALES CHARGES
The charts below show the Class A and Class D sales charges, which decrease as the amount of your investment increases. Class A shares of the Funds (other than the Gartmore Bond Fund, Gartmore Government Bond Fund, Gartmore Tax-Free Income Fund, Gartmore Enhanced Income Fund and Gartmore Short Duration Bond Fund):
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED COMMISSION
------------------ ----------------- ------------------ ----------
less than $50,000 5.75% 6.10% 5.00%
$50,000 to $99,999 4.75 4.99 4.00
$100,000 to $249,999 3.50 3.63 3.00
$250,000 to $499,999 2.50 2.56 2.00
$500,000 to $999,999 2.00 2.04 1.75
$1 million or more None None None
|
CLASS A SHARES OF THE GARTMORE BOND FUND, GARTMORE GOVERNMENT BOND FUND, AND GARTMORE TAX-FREE INCOME FUND
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED COMMISSION
------------------ ----------------- ------------------ ----------
less than $100,000 4.25% 4.44% 3.75%
$100,000 to $249,999 3.50 3.63 3.00
$250,000 to $499,999 2.50 2.56 2.00
$500,000 to $999,999 2.00 2.04 1.75
$1 million or more None None None
|
CLASS A SHARES OF THE GARTMORE ENHANCED INCOME FUND AND GARTMORE SHORT DURATION BOND FUND
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED COMMISSION
------------------ ----------------- ------------------ ----------
less than $100,000 2.25% 2.30% 2.00%
$100,000 to $449,999 1.75 1.78% 1.50
$500,000 to $999,999 1.50 1.52% 1.25
$1 million or more None None None
|
CLASS D SHARES OF THE FUNDS
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED COMMISSION
------------------ ----------------- ------------------ ----------
less than $50,000 4.50% 4.71% 4.00%
$50,000 to $99,999 4.00 4.17 3.50
$100,000 to $249,999 3.00 3.09 2.50
$250,000 to $499,999 2.50 2.56 1.75
$500,000 to $999,999 2.00 2.04 1.25
$1 million to $24,999,999 0.50 0.50 0.50
$25 million or more None None None
|
WAIVER OF CLASS A AND CLASS D SALES CHARGES*
You may qualify for a reduced Class A sales charge if you own or are purchasing shares of the Funds. You may also qualify for a waiver of the Class A
sales charges. To receive the reduced or waived sales charge, you must inform Customer Service or your broker or other intermediary at the time of your purchase that you qualify for such a reduction or waiver. If you do not inform Customer service or your intermediary that you are eligible for a reduced or waived sales charge, you may not receive the discount or waiver that you are entitled to. You may have to produce evidence that you qualify for a reduced sales charge or waiver before you will receive it.
The sales charge applicable to Class A and D shares may be waived for the following purchases due to the reduced marketing effort required by GDSI:
(1) shares sold to other registered investment companies affiliated with NWDIMI,
(2) shares sold:
(a) to any pension, profit sharing, or other employee benefit plan for the employees of NWD, any of its affiliated companies, or investment advisory clients and their affiliates;
(b) to any endowment or non-profit organization;
(c) 401(k) plans, 457 plans, 403(b) plans, profit sharing and money purchase pension plans, defined benefit plans, nonqualified deferred compensation plans and other retirement accounts;
(d) to any life insurance company separate account registered as a unit investment trust;
(e) to Trustees and retired Trustees of the Trust (including its predecessor Trusts);
(f) to directors, officers, full-time employees, sales representatives and their employees, and retired directors, officers, employees, and sale representatives, their spouses (including domestic partners), children or immediate relatives (immediate relatives include mother, father, brothers, sisters, grandparents, grandchildren, ("Immediate Relatives")), and Immediate Relatives of deceased employees of any member of the Nationwide Insurance and Nationwide Financial companies, or any investment advisory clients of GMFCT and its affiliates;
(g) to directors, officers, and full-time employees, their spouses (including domestic partners), children or Immediate Relatives and Immediate Relatives of deceased employees of any sponsor group which may be affiliated with the Nationwide Insurance or Nationwide Financial companies from time to time, which include but are not limited to Farmland Industries, Inc., Maryland Farm Bureau, Inc., Ohio Farm Bureau Federation, Inc., Pennsylvania Farm Bureau, California Farm Bureau Federation, CHS Cooperatives and Southern States Cooperative, Inc.;
(h) to any qualified pension or profit sharing plan established by a Nationwide sales representative for himself/herself and his/her employees;
(i) to any person who pays for the shares with the proceeds from sales of Class D shares of a Fund if the new fund purchased does not have Class D shares and Class A shares are purchased instead.
(3) Class A shares sold:
(a) to any person purchasing through an account with an unaffiliated brokerage firm having an agreement with the Distributor to waive sales charges for those persons;
(b) to any directors, officers, full-time employees, sales representatives and their employees, their spouses (including domestic partners), children or Immediate Relatives, or any investment advisory clients of a broker-dealer having a dealer/selling agreement with the Distributor;
(c) to employer-sponsored retirement plans including pension, profit sharing or deferred compensation plans which are qualified under Sections 401(a), 403(b) or 457 of the Internal Revenue Code;
(d) to any person who previously owned Class R shares of the Montgomery Global Opportunities Fund, Montgomery Global Focus Fund, or Montgomery Partners Equity Plus Fund.
REDUCTION OF SALES CHARGES
REDUCTION OF CLASS A AND CLASS D SALES CHARGES
Shareholders can reduce or eliminate Class A and Class D shares' initial sales charge through one or more of the discounts described below:
o A LARGER INVESTMENT. The sales charge decreases as the amount of your investment increases.
o Rights of Accumulation. You and members of your family who live at the same
address can add the current value of your Class A, Class B and Class C
investments in the Gartmore Funds (except shares of the Gartmore Money
Market Fund), that you currently own or are currently purchasing to the
value of your Class A purchase, possibly reducing the sales charge. To the
extent you are eligible to purchase Class D shares of a Gartmore Fund,
these purchases may also be combined.
o INSURANCE PROCEEDS OR BENEFITS DISCOUNT PRIVILEGE. If you use the proceeds
of an insurance policy issued by any Nationwide Insurance company to
purchase Class A or Class D shares, you will pay one half of the published
sales charge if you make your investment 60 days after receiving the
proceeds.
o NO SALES CHARGE ON A REPURCHASE. If you sell Fund shares from your account,
we allow you a one-time privilege to reinvest some or all of the proceeds
in shares of the same class. You will not pay a sales charge on Class A and
Class D shares that you buy within 30 days of selling Class A or Class D
shares of an equal or greater amount if you have already paid a sales
charge. Remember, if you realize a gain or a loss on your sale of shares,
the transaction is taxable and reinvestment will not affect the amount of
capital gains tax that is due. If you realize a loss on your sale and you
reinvest, some or all of the loss may not be allowed as a tax deduction
depending on the amount you reinvest.
o LETTER OF INTENT DISCOUNT. State in writing that during a 13-month period
you or a group of family members who live at the same address will purchase
or hold at least $50,000 in Class A or Class D shares (excluding the
Gartmore Money Market Fund) and your sales charge will be based on the
total amount you intend to invest. You can also combine your purchase of
Class B and Class C Shares to fulfill your Letter of Intent. The letter may
be backdated up to 90 days to include previous purchases for determining
your sales charge. Your Letter of Intent is not a binding obligation to buy
shares of the Fund; it is merely a statement of intent. Call 1-800-848-0920
for more information.
CLASS B AND CLASS X SHARES OF THE FUNDS AND CDSC
GDSI compensates broker-dealers and financial intermediaries for sales of Class B or Class X shares from its own resources at the rate of 4.00% of such sales. A CDSC, payable to GDSI, will be imposed on any redemption of Class B or Class X shares which causes the current value of your account to fall below the total amount of all purchases made during the preceding six years. The CDSC is never imposed on dividends, whether paid in cash or reinvested, or on appreciation over the initial purchase price. The CDSC applies only to the lesser of the original investment or current market value.
Where the CDSC is imposed, the amount of the CDSC will depend on the number of years since you made the purchase payment from which an amount is being redeemed, according to the following table:
CDSC on Shares
Years of after Purchase Being Sold
----------------------- --------------
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and following 0.00%
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For purposes of calculating the CDSC, it is assumed that the oldest Class B or Class X shares, as the case may be, remaining in your account will be sold first.
For the daily dividend Funds your money will earn daily dividends through the date of liquidation. If you redeem all of your shares in one of these Funds, you will receive a check representing the value of your account, less any applicable CDSC calculated as of the date of your withdrawal, plus all daily dividends credited to your account through the date of withdrawal.
AUTOMATIC WITHDRAWAL PLAN (AWP) ON CLASS B AND X SHARES
You will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. See the section entitled "Systematic Investment Strategies" for more information.
CONVERSION FEATURES FOR CLASS B AND CLASS X SHARES
Class B and Class X shares which have been outstanding for seven years will automatically convert to Class A shares in the next month following the seventh anniversary of the date on which such Class B or Class X shares were purchased. Such conversion will be on the basis of the relative net asset values of the two classes, without the imposition of a sales charge or other charge except that the lower 12b-1 fee applicable to Class A shares shall thereafter be applied to such converted shares. Because the per share net asset value of the Class A shares may be higher than that of the Class B or Class X shares at the time of the conversion, a shareholder may receive fewer Class A shares than the number of Class B or Class X shares converted, although the dollar value of the amount converted will be the same. Reinvestments of dividends and distributions in Class B or Class X shares will not be considered a new purchase for purposes of the conversion feature and will convert to Class A shares in the same proportion as the number of the shareholder's Class B or Class X shares converting to Class A shares bears to the shareholder's total Class B or Class X shares not acquired through dividends and distributions.
If you effect one or more exchanges among Class B shares of the Funds (or from Class X shares of the Gartmore Bond Fund, Gartmore Tax-Free Income Fund and Gartmore Government Bond Fund (the "Fixed Income Funds") to Class B shares of another Fund) during the seven-year period, the holding period for shares so exchanged will be counted toward such period. If you exchange Class B or Class X shares into the Prime Shares of the Gartmore Money Market Fund for a period of time, the conversion aging period will be stopped during the time period when shares are exchanged into the Money Market Fund.
CLASS A FINDER'S FEE AND CORRESPONDING CDSC
As of March 1, 2003, there are no front-end sales charges for purchases of Class A shares of the Funds of $1 million or more. An investor may purchase $1 million or more of Class A shares in one or more of the Gartmore Funds and avoid the front-end sales charge. However, unless an investor is otherwise eligible to purchase Class A shares without a sales charge, the investor will pay a CDSC if he or she redeems such Class A shares within 18 months of the date of purchase (24 months for Gartmore Enhanced Income and Gartmore Short Duration Bond Funds). With respect to such purchases, the Distributor may pay dealers a finders' fee (as described below) on investments made in Class A shares with no initial sales charge. The CDSC covers the finder's fee paid by the Distributor to the selling dealer. For the selling dealer to be eligible for the finders' fee, the following requirements apply:
o The purchase can be made in any combination of the Funds. The amount of the finder's fee will be determined based on the particular combination of the Funds purchased. The applicable finder's fee will be determined on a pro rata basis to the purchase of each particular Fund.
o The shareholder will be subject to a CDSC for shares redeemed in any redemption within the first 18 months of purchase (24 months for Gartmore Enhanced Income and Gartmore Short Duration Bond Funds).
The CDSC will equal the amount of the finder's fee paid out to the dealer as described in the chart below. The applicable CDSC will be determined on a pro rata basis according to the amount of the redemption from each particular Fund. The Class A CDSC will not exceed the aggregate amount of the finder's fee the Distributor paid to the selling dealer on all purchases of Class A shares of all Funds an investor made that were subject to the Class A CDSC.
AMOUNT OF FINDER'S FEE/CONTINGENT DEFERRED SALES CHARGE
------------------------------------------------------- --------------------------------------------------------
FUNDS PURCHASED AMOUNT OF PURCHASE
------------------------------------------------------- ------------------- ------------------- ----------------
$1 MILLION TO $4 MILLION TO $25 MILLION
$3,999,999 $24,999,999 OR MORE
------------------------------------------------------- ------------------- ------------------- ----------------
Gartmore International Growth Fund, Gartmore Emerging 1.00% 0.50% 0.25%
Markets Fund, Gartmore Global Technology and
Communications Fund, Gartmore Global Financial
Services Fund, Gartmore Global Utilities Fund,
Gartmore Global Health Sciences Fund, Gartmore
Nationwide Leaders Fund, Gartmore U.S. Growth
Leaders, Gartmore Worldwide Leaders Fund, Gartmore
Mid Cap Growth Leaders Fund, Gartmore Value
Opportunities Fund, Gartmore Micro Cap Equity
Fund, Gartmore U.S. Growth Leaders Long-Short
Fund, Gartmore China Opportunities Fund, Gartmore
Global Natural Resources Fund, Gartmore Small Cap
Leaders Fund and Optimal Allocations Funds
------------------------------------------------------- ------------------- ------------------- ----------------
Gartmore Nationwide Fund, Gartmore Growth Fund, 0.50% 0.50% 0.25%
Gartmore Large Cap Value Fund, Gartmore Mid Cap
Growth Fund, Gartmore Small Cap Fund and NorthPointe
Small Cap Growth Fund
------------------------------------------------------- ------------------- ------------------- ----------------
Gartmore S&P 500 Index Fund, Gartmore Small Cap Index None None None
Fund, Gartmore Mid Cap Market Index Fund, Gartmore
International Index Fund and Gartmore Bond Index Fund
------------------------------------------------------- ------------------- ------------------- ----------------
Investor Destinations Funds 0.15% 0.10% 0.05%
------------------------------------------------------- ------------------- ------------------- ----------------
Gartmore Bond Fund, Gartmore Government Bond Fund and 0.75% 0.50% 0.25%
Gartmore Tax-Free Income Fund
------------------------------------------------------- ------------------- ------------------- ----------------
Gartmore Enhanced Income Fund and Gartmore Short 0.35% 0.25% 0.15%
Duration Bond Fund
------------------------------------------------------- ------------------- ------------------- ----------------
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CDSC FOR CLASS C SHARES
You will pay a CDSC of 1.00% if you sell your Class C shares within the first year after you purchased the shares. The Distributor compensates broker-dealers and financial intermediaries for sales of Class C shares from its own resources at the rate of 0.85% of sales of Class C shares of the Gartmore Bond Fund, Gartmore Tax-Free Income Fund, and Gartmore Government Bond Fund and at the rate of 1.00% of sales of Class C shares of the remaining Funds having Class C shares. Class C shares of the Gartmore Money Market Fund are not subject to a CDSC.
OTHER DEALER COMPENSATION
In addition to the dealer commissions and payments under its 12b-1 Plan, from time to time, GMFCT and/or its affiliates may make payments for distribution and/or shareholder servicing activities out of their past profits and other of their own resources. GMFCT and/or its affiliates may make payments for marketing, promotional, or related services provided by dealers and other financial intermediaries, and may be in exchange for factors that include, without limitation, differing levels or types of services provided by the intermediary, the expected level of assets or sales of shares, the placing of some or all of the Funds on a preferred or recommended list, access to an intermediary's personnel, and other factors. The amount of these payments is determined by GMFCT.
In addition to these payments described above, GMFCT or its affiliates may offer other sales incentives in the form of sponsorship of educational or client seminars relating to current products and issues, assistance in training and educating the intermediary's personnel, and/or entertainment or meals. These payments also may include, at the direction of a retirement plan's named fiduciary, amounts to intermediaries for certain plan expenses or otherwise for the benefit of plan participants and beneficiaries. As permitted by applicable law, GMFCT or its affiliates may pay or allow other incentives or payments to intermediaries.
The payments described above are often referred to as "revenue sharing payments." The recipients of such payments may include:
o the Distributor and other affiliates of GMFCT,
o broker-dealers,
o financial institutions, and
o other financial intermediaries through which investors may
purchase shares of a Fund.
Payments may be based on current or past sales; current or historical assets; or a flat fee for specific services provided. In some circumstances, such payments may create an incentive for an intermediary or its employees or associated persons to recommend or sell shares of a Fund to you instead of shares of funds offered by competing fund families.
CLASS X AND CLASS Y SHARES (THE FIXED INCOME FUNDS)
If you owned Class B or Class C shares of the Fixed Income Funds on September 1, 2003, your shares were redesignated as Class X or Class Y shares, respectively. Class X and Class Y shares of the Fixed Income Funds retain the same fee and expense structure as the formerly designated Class B and Class C shares. Class X and Class Y shares of a Fixed Income Fund are not offered to the public and may only be purchased by existing Class X or Class Y shareholders (former Class B and Class C shareholders, respectively) of that Fixed Income Fund as a subsequent purchase or through the reinvestment of dividends and/or income. Specifically, only Class X shareholders of a particular Fixed Income Fund will be permitted to purchase additional Class X shares of that Fixed Income Fund, and only Class Y shareholders of a Fixed Income Fund will be
permitted to purchase additional Class Y shares of that Fixed Income Fund. To make a subsequent purchase you must purchase through the same account and in the same capacity. If you sell or exchange all of your Class X or Class Y shares of a Fixed Income Fund, you may not purchase Class X or Class Y shares, respectively, of the Fixed Income Fund in the future.
CLASS R SHARES
Class R shares generally are available only to 401(k) plans, 457 plans, 403(b) plans, profit sharing and money purchase pension plans, defined benefit plans, non-qualified deferred compensation plans and other retirement accounts (collectively, "retirement plans") whereby the retirement plan or the retirement plan's financial service firm has an agreement with GDSI to utilize Class R shares in certain investment products or programs. Class R shares are generally available to small and mid sized retirement plans having at least $1 million in assets. In addition, Class R shares also are generally available only to retirement plans where Class R shares are held on the books of the Funds through omnibus accounts (either at the plan level or at the level of the financial services firm) and where the plans are introduced by an intermediary, such as a broker, third party administrator, registered investment adviser or other retirement plan service provider. Class R shares are not available to retail or institutional non-retirement accounts, traditional and Roth IRAs, Coverdell Education Savings Accounts, SEPs, SAR-SEPs, one person Keogh plans, SIMPLE IRAs, or individual 403(b) plans, or through 529 Plan accounts.
A retirement plan's intermediaries can help determine which class is appropriate for that retirement plan. If a retirement plan qualifies to purchase other shares of a Fund, one of these other classes may be more appropriate than Class R shares. Specifically if a retirement plan eligible to purchase Class R shares is otherwise qualified to purchase Class A shares at net asset value or at a reduced sales charge or to purchase Institutional Service Class, Institutional Class or Service Class shares, one of these classes may be selected where the retirement plan does not require the distribution and administrative support services typically required by Class R share investors and/or the retirement plan's intermediaries have elected to forgo the level of compensation that Class R shares provide. Plan fiduciaries should consider their obligations under ERISA in determining which class is an appropriate investment for a retirement plan. A retirement plan's intermediaries may receive different compensation depending upon which class is chosen.
REDEMPTIONS
A Fund may delay forwarding redemption proceeds for up to seven days if the investor redeeming shares is engaged in excessive trading, or if the amount of the redemption request otherwise would be disruptive to efficient portfolio management, or would adversely affect the Fund. Certain Funds may also assess redemption fees on shares held less than 90 days, 30 days or 7 days, as set forth in each Fund's current prospectus. Those fees are 2.00% of the total redemption amount and are paid directly to the appropriate Fund to offset brokerage commissions, market impact and other costs associated with short-term trading of Fund shares. Certain intermediaries cannot assess and collect redemption fees from their accounts. To the extent redemption fees cannot be collected on particular transactions and excessive short-term trading occurs, the remaining shareholders bear the expense of such trading.
IN KIND REDEMPTIONS
The Funds generally plan to redeem their shares for cash with the following exceptions. The Gartmore Short Duration Bond Fund has elected to redeem shares with respect to any one shareholder during any 90-day period solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of the period. Additionally, it intends to redeem shares in cash for any requests of up to $1,000,000. See "Redemption of Shares of the Gartmore Short Duration Bond Fund - Redemption in-Kind" below for more information.
As described in their respective Prospectuses, each Fund reserves the right, in circumstances where in its sole discretion it determines that cash redemption payments would be undesirable, taking into account the best interests of all fund shareholders, to honor any redemption request by transferring some of the securities held by the Fund directly to you (an "in kind redemption").
The Trust's Board of Trustees has adopted procedures for redemptions in-kind to affiliated persons of a Fund. Affiliated persons of a Fund include shareholders who are affiliates of a Fund's investment adviser and shareholders of a Fund owning 5% or more of the outstanding shares of that Fund. These procedures provide that a redemption in-kind shall be effected at approximately the affiliated shareholder's proportionate share of the distributing Fund's
current net assets, and they are designed so that redemptions will not favor the affiliated shareholder to the detriment of any other shareholder. The procedures also require that the distributed securities be valued in the same manner as they are valued for purposes of computing the distributing Fund's net asset value and that neither the affiliated shareholder nor any other party with the ability and pecuniary incentive to influence the redemption in-kind selects, or influences the selection of, the distributed securities. Use of the redemption in-kind procedures will allow a Fund to avoid having to sell significant portfolio assets to raise cash to meet the shareholder's redemption request - thus limiting the potential adverse effect on the distributing Fund's net asset value.
REDEMPTION OF SHARES OF THE GARTMORE SHORT DURATION BOND FUND
OTHER REDEMPTION REQUIREMENTS. Redemption requests for Service Class and
Institutional Class Shares from Plans with more than $1,000,000 in the Fund and
which represent a withdrawal of 5% or more of a Plan's assets on any business
day must include or be preceded by the following information: (i) the Plan name;
(ii) a listing of the Plan trustee(s); (iii) copies of Plan documents or
summaries which describe the investment options available to and restrictions
imposed upon Plan participants; (iv) a listing of the allocation of Plan assets
across available investment options; (v) for the three year period immediately
preceding the withdrawal, a monthly summary of cash flow activity for the
investment option in which the Shares are included, detailing contribution and
benefit payment amount and amounts transferred to and from other investment
options; and (vi) in the case of Plans subject to ERISA, identification of a
"Qualified Professional Asset Manager" within the meaning of Department of Labor
Prohibited Transaction Class Exemption 84-14 (March 8, 1984). The Fund may waive
these requirements under some circumstances. For purposes of this paragraph,
"Plans" include employee benefit plans qualified under Section 401(a) of the
Internal Revenue Code, "governmental plans" as defined in Section 414(d) of the
Code, eligible deferred compensation plans as defined in Section 457 of the
Code, and employee benefit plans qualifying under Section 403(b) of the Code.
REDEMPTION FEES. Generally, redemption requests on all Shares will be subject to a 2% redemption fee for all redemptions made within 7 days of purchase. The redemption fee will be retained by the Fund to help minimize the impact the redemptions may have on Fund performance and to support administrative costs associated with redemptions from the Fund. Additionally, the redemption fee may discourage market timing by those shareholders initiating redemptions to take advantage of short-term movements in interest rates.
Redemptions of Service Class or Institutional Class Shares by participants in a Plan and Contract owners for reasons of death, disability, retirement, employment termination, loans, hardship, and other Plan permitted withdrawals and investment transfers to non-Competing Funds (each, a "Benefit Responsive Payment Event") are not subject to a redemption fee. All other redemptions of shares are subject to a 2% redemption fee as described above, payable to the Fund.
REDEMPTION IN-KIND. In certain circumstances, the Fund reserves the right to honor a redemption request by making payment in whole or in part in securities selected solely at the discretion of GMCM. The Fund will always redeem shares in cash for redemption requests up to the lesser of $250,000 or 1% of the net asset value of the Fund pursuant to an election made by the Fund and filed with the SEC. In addition, the Fund does not intend to do an in-kind redemption for any redemption requests of less than $1,000,000. The Fund does not anticipate exercising its right to redeem in-kind except in extraordinary circumstances as determined by the Fund and never if a request for redemption is received in connection with a Benefit Responsive Payment Event or for redemption of Class A or IRA Class Shares.
To the extent a payment in kind is made with securities, you may incur transaction expenses in holding and disposing of the securities. Therefore, in receiving securities you may incur costs that may exceed your share of the operating expenses incurred by the Fund.
MEDALLION SIGNATURE GUARANTEE
A Medallion signature guarantee is required if: (1) your account address has changed within the last 15 calendar days; (2) the redemption check is made payable to anyone other than the registered shareholder; (3) the proceeds are sent to a bank account not previously designated or changed within the past 10 business days; (4) proceeds are mailed to an address other than the address of record; or (5) the redemption proceeds are being wired to bank for which instructions are currently not on your account. The Distributor reserves the
right to require a Medallion signature guarantee in other circumstances, without notice. Based on the circumstances of each transaction, the Distributor reserves the right to require that your signature be guaranteed by an authorized agent of an "eligible guarantor institution," which includes, but is not limited to, certain banks, credit unions, savings associations, and member firms of national securities exchanges. A Medallion signature guarantee is designed to protect the shareholder by helping to prevent an unauthorized person from redeeming shares and obtaining the proceeds. A notary public is not an acceptable guarantor. In certain special cases (such as corporate or fiduciary registrations), additional legal documents may be required to ensure proper authorizations. If the Distributor decides to require signature guarantees in all circumstances, shareholders will be notified in writing prior to implementation of the policy. The Distributor, at its discretion, may waive the requirement for a signature guarantee.
ACCOUNTS WITH LOW BALANCES
If the value of your account falls below $2,000 ($1,000 for IRA accounts) for any reason, including market fluctuation, you are generally subject to a $5 quarterly fee, which is deposited into the Fund to offset the expenses of small accounts. We will sell shares from your account quarterly to cover the fee.
We reserve the right to sell the rest of your shares and close your account if you make a sale that reduces the value of your account to less than $2,000 ($1,000 for IRA accounts). Before the account is closed, we will give you notice and allow you 60 days to purchase additional shares to avoid this action. We do this because of the high cost of maintaining small accounts.
If the monthly average balance of your account holding Prime shares of the Gartmore Money Market Fund falls below $250, there is a $2/month fee.
VALUATION OF SHARES
The net asset value per share ("NAV") for each Fund is determined as of the close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern Time) on each day that the Exchange is open and on such other days as the Board of Trustees determines (together, the "Valuation Time"). However, to the extent that a Fund's investments are traded in markets that are open when the New York Stock Exchange is closed, the value of the Fund's investments may change on days when shares cannot be purchased or redeemed.
The Funds will not compute net asset value on customary business holidays, including New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and other days when the New York Stock Exchange is closed.
Each Fund reserves the right to not determine NAV when: (i) a Fund has not received any orders to purchase, sell or exchange shares and (ii) changes in the value of that Fund's portfolio do not affect that Fund's net asset value.
The net asset value per share of a class is computed by adding the value of all securities and other assets in a Fund's portfolio allocable to such class, deducting any liabilities allocable to such class and any other liabilities charged directly to that class and dividing by the number of shares outstanding in such class.
Securities for which market quotations are readily available are valued at current market value as of Valuation Time. Equity securities are valued at the last quoted sale price, or if there is no sale price, the last quoted bid price provided by an independent pricing service approved by the Board of Trustees. Prices are taken from the primary market or exchange in which each security trades.
Debt and other fixed income securities (other than short-term obligations) are valued at the last quoted bid price and/or by using a combination of daily quotes and matrix evaluations provided by an independent pricing service, the use of which has been approved by the Board of Trustees. Short term debt securities such as commercial paper and U.S. treasury bills, having a remaining maturity of 60 days or less are considered to be "short term" and are valued at amortized cost which approximates market value. The pricing service activities and results are reviewed by an officer of the Fund.
Securities for which market quotations are not readily available, or for which an independent pricing service does not provide a value or provides a value that does not represent fair value in the judgment of the Funds' investment adviser or designee, are valued at fair value under procedures approved by the Funds' Board of Trustees. Fair value determinations are required for securities whose value is affected by a significant event that will materially affect the value of a domestic or foreign security and which occurs subsequent to the time of the close of the principal market on which such domestic or foreign security trades but prior to the calculation of the Fund's NAV.
The Funds holding foreign equity securities (the "Foreign Equity Funds") value securities at fair value in the circumstances described below. Generally, trading in foreign securities markets is completed each day at various times prior to the Valuation Time. Due to the time differences between the closings of the relevant foreign securities exchanges and the Valuation Time for the Foreign Equity Funds, the Foreign Equity Funds will fair value their foreign investments when the market quotations for the foreign investments either are not readily available or are unreliable and, therefore, do not represent fair value. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on the Foreign Equity Funds' foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees have determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair valuation of portfolio securities may occur on a daily basis. The fair value pricing by the Trust utilizes data furnished by an independent pricing service (and that data draws upon, among other information, the market values of foreign investments). The fair value prices of portfolio securities generally will be used when it is determined that the use of such prices will have an impact on the NAV of a Foreign Equity Fund. When a Foreign Equity Fund uses fair value pricing, the values assigned to the Foreign Equity Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
The value of portfolio securities in the Money Market Fund is determined on the basis of the amortized cost method of valuation in accordance with Rule 2a-7 of the 1940 Act. This involves valuing a security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if it sold the instrument.
The Trustees have adopted procedures whereby the extent of deviation, if any, of the current NAV calculated using available market quotations from the Money Market Fund's amortized cost price per share, will be determined at such intervals as the Trustees deem appropriate and are reasonable in light of current market conditions. In the event such deviation from the Money Market Fund's amortized cost price per share exceeds 1/2 of 1 percent, the Trustees will consider appropriate action to eliminate or reduce to the extent reasonably practical such dilution or other unfair results which might include: reducing or withholding dividends; redeeming shares in-kind; selling portfolio instruments prior to maturity to realize capital gains or losses to shorten the Fund's average portfolio maturity; or utilizing a NAV as determined by using available market quotations.
The Trustees, in supervising the Money Market Fund's operations and delegating special responsibilities involving portfolio management to GMFCT, have undertaken as a particular responsibility within their overall duty of care owed to the Money Market Fund's shareholders to assure to the extent reasonably practicable, taking into account current market conditions affecting the Fund's investment objectives, that the Money Market Fund's NAV will not deviate from $1.
Pursuant to its objective of maintaining a stable NAV, the Money Market Fund will only purchase investments with a remaining maturity of 397 days or less and will maintain a dollar weighted average portfolio maturity of 90 days or less.
FUNDS OF FUNDS
Shares of the Underlying Funds are valued at their respective NAVs as reported to GSA or its agent. Other assets of the Funds of Funds are valued at their current market value if market quotations are readily available. If market quotations are not available, or if GSA determines that the price of a security does not represent its fair value, these assets are valued at fair value in accordance with procedures adopted by the Board of Trustees.
SYSTEMATIC INVESTMENT STRATEGIES
DIRECTED DIVIDENDS - This strategy provides the security of principal that the Gartmore Money Market Fund offers plus the opportunity for greater long-term capital appreciation or income through reinvestment of dividends in one or more of the equity or fixed-income Funds, respectively.
An initial investment of $5,000 or more is made in the Prime Shares of the Gartmore Money Market Fund, and monthly dividends are then automatically invested into one or more of the equity Funds chosen by you at such equity Fund's current offering price. Gartmore Money Market Fund dividends reinvested into one of the equity Funds are subject to applicable sales charges.
AUTOMATIC ASSET ACCUMULATION - This is a systematic investment strategy which combines automatic monthly transfers from your personal checking account to your mutual fund account with the concept of Dollar Cost Averaging. With this strategy, you invest a fixed amount monthly over an extended period of time, during both market highs and lows. Dollar Cost Averaging can allow you to achieve a favorable average share cost over time since your fixed monthly investment buys more shares when share prices fall during low markets, and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past.
Once you have opened an account with at least $1,000, you can contribute to an Automatic Asset Accumulation plan for as little as $50 a month in a Fund. Another way to take advantage of the benefits that Dollar Cost Averaging can offer is through Directed Dividends, as described above.
AUTOMATIC ASSET TRANSFER - This systematic investment plan allows you to transfer $25 or more to one Fund from another Fund systematically, monthly or quarterly, after Fund minimums have been met. The money is transferred on the 25th day of the month as selected or on the preceding business day. Dividends of any amount can be moved automatically from one Fund to another at the time they are paid. This strategy can provide investors with the benefits of Dollar Cost Averaging through an opportunity to achieve a favorable average share cost over time. With this plan, your fixed monthly or quarterly transfer from the Fund to any other Fund you select buys more shares when share prices fall during low markets and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past. For transfers from the Prime Shares of the Gartmore Money Market Fund to another Fund, sales charges may apply if not already paid.
Automatic Withdrawal Plan ($50 or More) - You may have checks for any fixed amount of $50 or more automatically sent bi-monthly, monthly, quarterly, semi-annually or annually, to you (or anyone you designate) from your account. Complete the appropriate section of the New Account Form or contact your financial intermediary or the Fund. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce and eventually deplete your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge while simultaneously redeeming shares under the program. The $50 minimum is waived for required minimum distributions from individual retirement accounts.
For Class B shares, you will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year. For each AWP payment, assets that are not subject to a CDSC, such as appreciation on shares and shares acquired through reinvestment of dividends and/or capital gains distributions, will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC to cover a particular AWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any dividends and/or capital gains distributions taken in cash by a shareholder who receives payments through AWP will also count toward the 12% limit. In the case of AWP, the 12% limit is calculated at the time of an automatic redemption is first made, and is recalculated at the time each additional automatic redemption is made.
NOTE: If you are withdrawing more shares than your account receives in dividends, you will be decreasing your total shares owned, which will reduce your future dividend potential.
INVESTOR PRIVILEGES
The Funds offer the following privileges to shareholders. Additional information may be obtained by calling GDSI toll free at 800-848-0920.
NO SALES CHARGE ON REINVESTMENTS - All dividends and capital gains will be automatically reinvested free of charge in the form of additional shares within the same Fund and class or another specifically requested Fund (but the same class) unless you have chosen to receive them in cash on your application. Unless requested in writing by the shareholder, the Trust will not mail checks for dividends and capital gains of less than $5 but instead they will automatically be reinvested in the form of additional shares.
Exchange Privilege - The exchange privilege is a convenient way to exchange shares from one Fund to another Fund in order to respond to changes in your goals or in market conditions. The registration of the account to which you are making an exchange must be exactly the same as that of the Fund account from which the exchange is made, and the amount you exchange must meet the applicable minimum investment of the Fund being purchased. The exchange privilege may be limited due to excessive trading or market timing of Fund shares.
EXCHANGES AMONG FUNDS
Exchanges may be made among any of the Gartmore Funds within the same class of shares (except for any other Fund not currently accepting purchase orders or Class X or Class Y shares of the Fixed Income Funds), so long as both accounts have the same registration, and your first purchase in the new Fund meets the new Fund's minimum investment requirement.
Because Class R shares of the Funds are held within retirement plans, exchange privileges with other Class R shares of the Gartmore Funds may not be available unless the Class R shares of the other Gartmore Funds are also available within a plan. Please contact your retirement plan administrator for information on how to exchange your Class R shares within your retirement plan.
Generally, there is no sales charge for exchanges of Class B, Class C, Class D, Class X, Class Y, Service Class, Institutional Service Class or Institutional Class shares. However, if your exchange involves certain Class A shares, you may have to pay the difference between the sales charges if a higher sales charge applies to the Fund into which you are exchanging. If you exchange your Class A shares of a Fund that are subject to a CDSC into another Gartmore Fund and then redeem those Class A shares within 18 months of the original purchase (24 months for Gartmore Enhanced Income and Gartmore Short Duration Bond Funds), the applicable CDSC will be the CDSC for the original Fund. If you exchange Prime Shares of the Gartmore Money Market Fund into another fund, you must pay the applicable sales charge, unless it has already been paid prior to an exchange into the Gartmore Money Market Fund. Exchanges into the Prime Shares of the Money Market Fund are only permitted from Class A, Class B, Class C, Class D, Class X, Class Y and Institutional Service Class shares of other Gartmore Funds. If you exchange Class B, Class C, Class X or Class Y shares (or certain Class A shares subject to a CDSC) for Prime Shares of the Money Market Fund, the time you hold the shares in the Money Market Fund will not be counted for purposes of calculating any CDSC. As a result, if you then sell your Prime Shares of the Money Market Fund, you will pay the sales charge that would have been charged if the initial Class B, Class C, Class X or Class Y (or certain Class A) shares had been sold at the time they were originally exchanged into the Money Market Fund. If you exchange your Prime Shares of the Money Market Fund back into Class B or Class C (or certain Class A) shares, the time you held Class B, Class C, Class X or Class Y (or Class A) shares prior to the initial exchange into the Money Market Fund will be counted for purposes or calculating the CDSC. Class X shareholders of a Fixed Income Fund may exchange their shares for Class B shares of any of the Gartmore Funds currently accepting purchase orders and Class Y shareholders of a Fixed Income Fund may exchange their shares for Class C shares of any such Gartmore Fund. However, if you exchange out of Class X or Class Y shares of a Fixed Income Fund into Class B or Class C of another Gartmore Fund, respectively (or into Prime Shares of the Money Market Fund), you will not be permitted to exchange from Class B or Class C of the other Gartmore Fund (or Prime Shares of the Money Market Fund) back into Class X or Class Y shares of the original Fixed Income Fund. If you wish to purchase shares of a Fund or class for which the exchange privilege does not apply, you will pay any applicable CDSC at the time you redeem your shares and pay any applicable front-end load on the new Fund you are purchasing unless a sales charge waiver otherwise applies.
FREE CHECKING WRITING PRIVILEGE (PRIME SHARES OF THE GARTMORE MONEY MARKET FUND ONLY) - You may request a supply of free checks for your personal use and there is no monthly service fee. You may use them to make withdrawals of $500 or more from your account at any time. Your account will continue to earn daily income dividends until your check clears your account. There is no limit on the number of checks you may write. Cancelled checks will not be returned to you. However,
your monthly statement will provide the check number, date and amount of each check written. You will also be able to obtain copies of cancelled checks, the first five free and $2.00 per copy thereafter, by contacting one of our service representatives at 800-848-0920.
EXCHANGES MAY BE MADE FOUR CONVENIENT WAYS:
BY TELEPHONE
AUTOMATED VOICE RESPONSE SYSTEM - You can automatically process exchanges for the Funds (except for the Gartmore Short Duration Bond Fund IRA Class shares and the Class X and Class Y shares of the Fixed Income Funds) by calling 800-848-0920, 24 hours a day, seven days a week. However, if you declined the option on the application, you will not have this automatic exchange privilege. This system also gives you quick, easy access to mutual fund information. Select from a menu of choices to conduct transactions and hear fund price information, mailing and wiring instructions as well as other mutual fund information. You must call our toll free number by the Valuation Time to receive that day's closing share price. The Valuation Time is the close of regular trading of the New York Stock Exchange, which is usually 4:00 p.m. Eastern Time.
CUSTOMER SERVICE LINE - By calling 800-848-0920, you may exchange shares by telephone. Requests may be made only by the account owner(s). You must call our toll free number by the Valuation Time to receive that day's closing share price.
The Funds may record all instructions to exchange shares. The Funds reserve the right at any time without prior notice to suspend, limit or terminate the telephone exchange privilege or its use in any manner by any person or class.
The Funds will employ the same procedure described under "Buying, Selling and Exchanging Fund Shares" in the Prospectus to confirm that the instructions are genuine.
The Funds will not be liable for any loss, injury, damage, or expense as a result of acting upon instructions communicated by telephone reasonably believed to be genuine, and the Funds will be held harmless from any loss, claims or liability arising from its compliance with such instructions. These options are subject to the terms and conditions set forth in the Prospectus and all telephone transaction calls may be recorded. The Funds reserve the right to revoke this privilege at any time without notice to shareholders and request the redemption in writing, signed by all shareholders.
BY MAIL OR FAX - Write or fax to Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205 or fax to (614) 428-3278. Please be sure that your letter or facsimile is signed exactly as your account is registered and that your account number and the Fund from which you wish to make the exchange are included. For example, if your account is registered "John Doe and Mary Doe", "Joint Tenants With Right of Survivorship,' then both John and Mary must sign the exchange request. The exchange will be processed effective the date the signed letter or fax is received. Fax requests received after the Valuation Time will be processed as of the next business day. The Funds reserve the right to require the original document if you use the fax method.
BY ON LINE ACCESS - Log on to our website www.nwdfunds.com 24 hours a day, seven days a week, for easy access to your mutual fund accounts. Once you have reached the website, you will be instructed on how to select a password and perform transactions. You can choose to receive information on all of Funds as well as your own personal accounts. You may also perform transactions, such as purchases, redemptions and exchanges. The Funds may terminate the ability to buy Fund shares on its website at any time, in which case you may continue to exchange shares by mail, wire or telephone pursuant to the Prospectus.
INVESTOR SERVICES
AUTOMATED VOICE RESPONSE SYSTEM - Our toll free number 800-848-0920 will connect you 24 hours a day, seven days a week to the system. Through a selection of menu options, you can conduct transactions, hear fund price information, mailing and wiring instructions and other mutual fund information.
TOLL FREE INFORMATION AND ASSISTANCE - Customer service representatives
are available to answer questions regarding the Funds and your account(s)
between the hours of 8 a.m. and 9 p.m. Eastern Time (Monday through
Friday). Call toll free: 800-848-0920 or contact us at our fax number
(614) 428-3278.
RETIREMENT PLANS (NOT AVAILABLE WITH THE TAX-FREE INCOME FUND) - Shares of the Funds may be purchased for Self-Employed Retirement Plans, Individual Retirement Accounts (IRAs), Roth IRAs, Coverdell Education Savings Accounts, IRAs, Simplified Employee Pension Plans, Corporate Pension Plans, Profit Sharing Plans and Money Purchase Plans. For a free information kit, call 1-800-848-0920.
SHAREHOLDER CONFIRMATIONS - You will receive a confirmation statement each time a requested transaction is processed. However, no confirmations are mailed on certain pre-authorized, systematic transactions, or IRAs. Instead, these will appear on your next consolidated statement. No confirmations are sent for transactions in the Gartmore Money Market Fund. You will receive a monthly activity statement if there are any non-dividend transactions for the Gartmore Money Market Fund.
CONSOLIDATED STATEMENTS - Shareholders of the Funds, receive quarterly statements as of the end of March, June, September and December. Shareholders of the Money Market Fund will also receive monthly activity reports confirming any transactions. Please review your statement carefully and notify us immediately if there is a discrepancy or error in your account.
For shareholders with multiple accounts, your consolidated statement will reflect all your current holdings in the Funds. Your accounts are consolidated by social security number and zip code. Accounts in your household under other social security numbers may be added to your statement at your request. Only transactions during the reporting period will be reflected on the statements. An annual summary statement reflecting all calendar-year transactions in all your Funds will be sent after year-end.
AVERAGE COST STATEMENT - This statement may aid you in preparing your tax return and in reporting capital gains and losses to the IRS. If you redeemed any shares during the calendar year, a statement reflecting your taxable gain or loss for the calendar year (based on the average cost you paid for the redeemed shares) will be mailed to you following each year-end. Average cost can only be calculated on accounts opened on or after January 1, 1984. Fiduciary accounts and accounts with shares acquired by gift, inheritance, transfer, or by any means other than a purchase cannot be calculated.
Average cost is one of the IRS approved methods available to compute gains or losses. You may wish to consult a tax advisor on the other methods available. The average cost information will not be provided to the IRS. If you have any questions, contact one of our service representatives at 800-848-0920.
SHAREHOLDER REPORTS - All shareholders will receive reports semi-annually detailing the financial operations of the Funds.
PROSPECTUSES - Updated prospectuses will be mailed to you at least annually.
Undeliverable Mail - If mail from the Funds to a shareholder is returned as undeliverable on two or more consecutive occasions, the Funds will not send any future mail to the shareholder unless it receives notification of a correct mailing address for the shareholder. With respect to any redemption checks or dividend/capital gains distribution checks that are returned as undeliverable or not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and any future distributions in shares of the particular Fund at the then-current NAV of such Fund until the Funds receive further instructions from the shareholder.
FUND PERFORMANCE ADVERTISING
Standardized yield and total return quotations will be compared separately for each class of shares. Because of differences in the fees and/or expenses borne by the various classes of the Funds, the net yields and total returns on such class shares can be expected, at any given time, to differ from class to class for the same period.
CALCULATING MONEY MARKET FUND YIELD
Any current Money Market Fund yield quotations, subject to Rule 482 under the Securities Act, shall consist of a seven-calendar day historical yield for each class, carried at least to the nearest hundredth of a percent. The yield shall be calculated by determining the change, excluding realized and unrealized gains and losses, in the value of a hypothetical pre-existing account in each class having a balance of one share at the beginning of the period, dividing the net change in account value by the value of the account at the beginning of the base period to obtain the base period return, and multiplying the base period return by 365/7 (or 366/7 during a leap year). For purposes of this calculation, the net change in account value reflects the value of additional shares purchased with dividends declared on both the original share and any such additional shares. The Fund's effective yield represents an annualization of the current seven-day return with all dividends reinvested. The yields for each class will differ due to different fees and expenses charged on the class.
The Money Market Fund's yields will fluctuate daily. Actual yields will depend on factors such as the type of instruments in the Money Market Fund's portfolio, portfolio quality and average maturity, changes in interest rates, and the Money Market Fund's expenses.
Although the Fund determines its yield for each class on the basis of a seven-calendar day period, it may use a different time span on occasion.
There is no assurance that the yields quoted on any given occasion will remain in effect for any period of time and there is no guarantee that the NAVs will remain constant. It should be noted that a shareholder's investment in the Fund is not guaranteed or insured. Yields of other money market funds may not be comparable if a different base period or another method of calculation is used.
CALCULATING YIELD AND TOTAL RETURN
The Funds may from time to time advertise historical performance, subject to Rule 482 under the Securities Act. An investor should keep in mind that any return or yield quoted represents past performance and is not a guarantee of future results. The investment return and principal value of investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
BEFORE-TAX PERFORMANCE. Except for the Gartmore Money Market Fund and the Gartmore Short Duration Bond Fund, all pre-tax performance advertisements shall include average annual total return quotations for the most recent one, five, and ten-year periods (or life if a Fund has been in operation less than one of the prescribed periods). Average annual total return represents redeemable value at the end of the quoted period. It is calculated in a uniform manner by dividing the ending redeemable value of a hypothetical initial payment of $1,000 minus the maximum sales charge, for a specified period of time, by the amount of the initial payment, assuming reinvestment of all dividends and distributions. In calculating the standard total returns for Class A and Class D shares, the current maximum applicable sales charge is deducted from the initial investment. For Class B and Class C shares, the payment of the applicable CDSC is applied to the investment result for the period shown. The one, five, and ten-year periods are calculated based on periods that end on the last day of the calendar quarter preceding the date on which an advertisement is submitted for publication.
AFTER-TAX PERFORMANCE. All after-tax performance is calculated as described in the paragraph above and in addition, takes into account the effect of taxes. After-tax performance is presented using two methodologies. The first deducts taxes paid on distributions. The second deducts taxes paid on distributions and taxes paid upon redemption of fund shares. The calculation of taxes assumes the highest individual marginal federal income tax rates currently in effect. The tax rates correspond to the tax characteristics of the distributions (e.g., ordinary income rate for ordinary income, short-term capital gain distribution rate for short-term capital gain distributions, and long-term capital gain distribution rate for long-term capital gain distributions). State, local or federal alternative minimum taxes are not taken into account, the effect of phase outs of certain exemptions, deductions and credits at various income levels are also not taken into account. Tax rates may vary over the performance measurement period. After-tax returns are not relevant to investors who hold fund shares through tax-deferred arrangements such as qualified retirement plans. Actual after-tax returns depend on an investor's tax situation and may differ from those shown.
Standardized yield and total return quotations will be compared separately for each class of shares. Because of differences in the fees and/or expenses borne by each class of shares of the Funds, the net yields and total returns on each class can be expected, at any given time, to differ from class to class for the same period.
The Gartmore Bond Fund, Gartmore Tax-Free Income Fund, Gartmore Government Bond Fund, Gartmore Short Duration Bond Fund, and the Gartmore Enhanced Income Fund may also from time to time advertise a uniformly calculated yield quotation. This yield is calculated by dividing the net investment income per share earned during a 30-day base period by the maximum offering price per share on the last day of the period, assuming reinvestment of all dividends and distributions. This yield formula uses the average daily number of shares outstanding during the period that were entitled to receive dividends, provides for semi-annual compounding of interest, and includes a modified market value method for determining amortization. The yield will fluctuate, and there is no assurance that the yield quoted on any given occasion will remain in effect for any period of time. The effect of sales charges are not reflected in the calculation of the yields, therefore, a shareholder's actual yield may be less.
The Gartmore Tax-Free Income Fund may also advertise a tax equivalent yield computed by dividing that portion of the uniformly calculated yield which is tax-exempt by one minus a stated income tax rate and adding the product to that portion, if any, of the yield that is not tax-exempt.
NONSTANDARD RETURNS
The Funds may also choose to show nonstandard returns including total return, and simple average total return. Nonstandard returns may or may not reflect reinvestment of all dividends and capital gains; in addition, sales charge assumptions will vary. Sales charge percentages decrease as amounts invested increase as outlined in the prospectus; therefore, returns increase as sales charges decrease.
Total return represents the cumulative percentage change in the value of an investment over time, calculated by subtracting the initial investment from the redeemable value and dividing the result by the amount of the initial investment. The simple average total return is calculated by dividing total return by the number of years in the period, and unlike average annual (compound) total return, does not reflect compounding.
RANKINGS AND RATINGS IN FINANCIAL PUBLICATIONS
The Funds may report their performance relative to other mutual funds or investments. The performance comparisons are made to: other mutual funds with similar objectives; other mutual funds with different objectives; or, to other sectors of the economy. Other investments which the Funds may be compared to include, but are not limited to: precious metals; real estate; stocks and bonds; closed-end funds; market indexes; fixed-rate, insured bank CDs, bank money market deposit accounts and passbook savings; and the Consumer Price Index.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper , Inc., CDA/Wiesenberger, Morningstar, Donoghue's, Schabaker Investment
Management, Kanon Bloch Carre & Co.; magazines such as MONEY, FORTUNE, FORBES,
KIPLINGER'S PERSONAL FINANCE MAGAZINE, SMART MONEY, MUTUAL FUNDS, WORTH,
FINANCIAL WORLD, CONSUMER REPORTS, BUSINESS WEEK, TIME, NEWSWEEK, U.S. NEWS AND
WORLD REPORT; AND OTHER PUBLICATIONS SUCH AS THE WALL STREET JOURNAL, BARRON'S,
INVESTOR'S BUSINESS DAILY, STANDARD & POOR'S OUTLOOK AND, COLUMBUS DISPATCH. The
rankings may or may not include the effects of sales charges.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Trust presently offers the following 49 series of shares of beneficial interest, without par value and with the various classes listed:
FUND SHARE CLASS
---- -----------
Gartmore Optimal Allocations Fund: Growth Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
|
FUND SHARE CLASS
---- -----------
Gartmore Optimal Allocations Fund: Moderate Growth Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Optimal Allocations Fund: Moderate Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Optimal Allocations Fund: Specialty Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Optimal Allocations Fund: Defensive Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Bond Fund Class A, Class B, Class C, Class D, Class R, Class X, Class Y,
Institutional Class
Gartmore China Opportunities Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Emerging Markets Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Global Financial Services Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Global Health Sciences Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Global Natural Resources Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Global Technology and Communications Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Global Utilities Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Government Bond Fund Class A, Class B, Class C, Class D, Class R, Class X, Class Y,
Institutional Class
Gartmore Growth Fund Class A, Class B, Class C, Class D, Class R, Institutional
Service Class, Institutional Class
Gartmore International Growth Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Investor Destinations Aggressive Fund Class A, Class B, Class C, Class R, Service Class,
Institutional Class
Gartmore Investor Destinations Moderately Aggressive Class A, Class B, Class C, Class R, Service Class,
Fund Institutional Class
Gartmore Investor Destinations Moderate Fund Class A, Class B, Class C, Class R, Service Class,
Institutional Class
Gartmore Investor Destinations Moderately Class A, Class B, Class C, Class R, Service Class,
Conservative Fund Institutional Class
|
FUND SHARE CLASS
---- -----------
Gartmore Investor Destinations Conservative Fund Class A, Class B, Class C, Class R, Service Class,
Institutional Class
Gartmore Large Cap Value Fund Class A, Class B, Class C, Class R, Institutional Service Class
Gartmore Micro Cap Equity Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Mid Cap Growth Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Mid Cap Growth Leaders Fund Class A, Class B, Class C, Class D, Class R, Institutional
Service Class, Institutional Class
Gartmore Money Market Fund Service Class, Prime Shares, Institutional Class
Gartmore Short Duration Bond Fund Class A, Class C, Service Class, Institutional Class, IRA
Gartmore Enhanced Income Fund Class A, Class R, Institutional Class, Institutional Service
Class
Gartmore Nationwide Fund Class A, Class B, Class C, Class D, Class R, Institutional
Service Class, Institutional Class
Gartmore Nationwide Leaders Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Small Cap Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Small Cap Leaders Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Tax-Free Income Fund Class A, Class B, Class C, Class D, Class X, Class Y
Gartmore U.S. Growth Leaders Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore U.S. Growth Leaders Long-Short Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Value Opportunities Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Worldwide Leaders Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
Gartmore Bond Index Fund Class A, Class B, Class C, Class R, Institutional Class
Gartmore International Index Fund Class A, Class B, Class C, Class R, Institutional Class
|
FUND SHARE CLASS
---- -----------
Gartmore Mid Cap Market Index Fund Class A, Class B, Class C, Class R, Institutional Class
Gartmore S&P 500 Index Fund Class A, Class B, Class C, Class R, Service Class,
Institutional Service Class, Local Fund Shares, Institutional
Class
Gartmore Small Cap Index Fund Class A, Class B, Class C, Class R, Institutional Class
NorthPointe Small Cap Value Fund Institutional Class
NorthPointe Small Cap Growth Fund Class A, Class B, Class C, Class R, Institutional Service
Class, Institutional Class
|
You have an interest only in the assets of the Fund whose shares you own. Shares of a particular class are equal in all respects to the other shares of that class. In the event of liquidation of a Fund, shares of the same class will share pro rata in the distribution of the net assets of such Fund with all other shares of that class. All shares are without par value and when issued and paid for, are fully paid and nonassessable by the Trust. Shares may be exchanged or converted as described in this Statement of Additional Information and in the Prospectus but will have no other preference, conversion, exchange or preemptive rights.
VOTING RIGHTS
Shareholders of each class of shares have one vote for each share held and a proportionate fractional vote for any fractional share held. An annual or special meeting of shareholders to conduct necessary business is not required by the Declaration of Trust, the 1940 Act or other authority except, under certain circumstances, to amend the Declaration of Trust, the Investment Advisory Agreement, fundamental investment objectives, investment policies and investment restrictions, to elect and remove Trustees, to reorganize the Trust or any series or class thereof and to act upon certain other business matters. In regard to termination, sale of assets, the change of investment objectives, policies and restrictions or the approval of an Investment Advisory Agreement, the right to vote is limited to the holders of shares of the particular Fund affected by the proposal. In addition, holders of shares subject to a Rule 12b-1 fee will vote as a class and not with holders of any other class with respect to the approval of the Distribution Plan.
To the extent that such a meeting is not required, the Trust does not intend to have an annual or special meeting of shareholders. The Trust has represented to the SEC that the Trustees will call a special meeting of shareholders for purposes of considering the removal of one or more Trustees upon written request therefor from shareholders holding not less than 10% of the outstanding votes of the Trust and the Trust will assist in communicating with other shareholders as required by Section 16(c) of the 1940 Act. At such meeting, a quorum of shareholders (constituting a majority of votes attributable to all outstanding shares of the Trust), by majority vote, has the power to remove one or more Trustees.
ADDITIONAL GENERAL TAX INFORMATION FOR ALL FUNDS
THE INFORMATION DISCUSSED IN THIS SECTION APPLIES GENERALLY TO ALL OF THE FUNDS, BUT IS SUPPLEMENTED OR MODIFIED IN ADDITIONAL SEPARATE SECTIONS THAT ARE PROVIDED BELOW FOR GARTMORE TAX-FREE INCOME FUND, THE MONEY MARKET FUND AND THE FUNDS OF FUNDS.
BUYING A DIVIDEND
If you invest in a Fund shortly before the record date of a taxable distribution, the distribution will lower the value of the Fund's shares by the amount of the distribution, and you will in effect receive some of your investment back, but in the form of a taxable distribution.
MULTI-CLASS FUNDS
Funds with multiple classes of shares calculate dividends and capital gain distributions the same way for each class. The amount of any dividends per share will differ, however, generally due to the difference in the distribution and service (Rule 12b-1) and administrative services fees applicable to each class.
DISTRIBUTIONS OF NET INVESTMENT INCOME
Each Fund receives income generally in the form of dividends and interest on its investments. This income, less expenses incurred in the operation of the Fund, constitutes the Fund's net investment income from which dividends may be paid to you. If you are a taxable investor, any distributions by the Fund from such income (other than qualified dividend income received by individuals) will be taxable to you as ordinary income, whether you receive them in cash or in additional shares. Distributions from qualified dividend income will be taxable to individuals at long-term capital gain rates, provided certain holding period requirements are met. See the discussion below under the heading, "Qualified Dividend Income for Individuals."
DISTRIBUTIONS OF CAPITAL GAIN
A Fund may realize a capital gain or loss in connection with sales or other dispositions of its portfolio securities. Distributions from net short-term capital gain will be taxable to you as ordinary income. Distributions from net long-term capital gain will be taxable to you as long-term capital gain, regardless of how long you have held your shares in the Fund. Any net capital gain (excess of net long-term capital gain over net short-term capital loss) realized by a Fund generally will be distributed once each year, and may be distributed more frequently, if necessary, to reduce or eliminate excise or income taxes on the Fund.
RETURNS OF CAPITAL
If the Fund's distributions exceed its taxable income and capital gains realized during a taxable year, all or a portion of the distributions made in the same taxable year may be recharacterized as a return of capital to shareholders. A return of capital distribution generally will not be taxable, but will reduce each shareholder's cost basis in the Fund and result in a higher reported capital gain or lower reported capital loss when those shares on which the distribution was received are sold. Any return of capital in excess of your basis, however, is taxable as a capital gain.
INVESTMENTS IN FOREIGN SECURITIES
The next three paragraphs describe tax considerations that are applicable to Funds that invest in foreign securities.
Effect of Foreign Withholding Taxes. A Fund may be subject to foreign withholding taxes on income from certain foreign securities. This, in turn, could reduce the Fund's distributions paid to you.
EFFECT OF FOREIGN DEBT INVESTMENTS ON DISTRIBUTIONS. Most foreign exchange gains realized on the sale of debt securities are treated as ordinary income by a Fund. Similarly, foreign exchange losses realized on the sale of debt securities generally are treated as ordinary losses. These gains when distributed are taxable to you as ordinary income, and any losses reduce a Fund's ordinary income otherwise available for distribution to you. This treatment could increase or decrease a Fund's ordinary income distributions to you, and may cause some or all of a Fund's previously distributed income to be classified as a return of capital. A return of capital generally is not taxable to you, but reduces the tax basis of your shares in the Fund. Any return of capital in excess of your basis, however, is taxable as a capital gain.
PASS-THROUGH OF FOREIGN TAX CREDITS. If more than 50% of a Fund's total
assets at the end of a fiscal year is invested in foreign securities, the Fund
may elect to pass through to you your pro rata share of foreign taxes paid by
the Fund. If this election is made, a Fund may report more taxable income to you
than it actually distributes. You will then be entitled either to deduct your
share of these taxes in computing your taxable income, or to claim a foreign tax
credit for these taxes against your U.S. federal income tax (subject to
limitations for certain shareholders). The Fund will provide you with the
information necessary to complete your personal income tax return if it makes
this election.
The amount of any foreign tax credits available to you (as a result of the
pass-through to you of your pro rata share of foreign taxes by paid by a Fund)
will be reduced if you receive from a Fund qualifying dividends from qualifying
foreign corporations that are subject to tax at reduced rates. Shareholders in
these circumstances should talk with their personal tax advisors about their
foreign tax credits and the procedures that they should follow to claim these
credits on their personal income tax returns.
PFIC SECURITIES. A Fund may invest in securities of foreign entities that could be deemed for tax purposes to be passive foreign investment companies (PFICs). When investing in PFIC securities, a Fund intends to mark-to-market these securities and recognizes any gains at the end of its fiscal and excise (described below) tax years. Deductions for losses are allowable only to the extent of any current or previously recognized gains. These gains (reduced by allowable losses) are treated as ordinary income that the Fund is required to distribute, even though it has not sold the securities. You should also be aware that the designation of a foreign security as a PFIC security would cause its
income dividends to fall outside of the definition of qualified foreign corporation dividends. These dividends will not qualify for the reduced rate of taxation on qualified dividends for individuals when distributed to you by the Fund. If a Fund is unable to identify an investment as a PFIC and thus does not make a mark-to-market election, the Fund may be subject to U.S. federal income tax on a portion of any "excess distribution" or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature of interest may be imposed on the Fund in respect of deferred taxes arising from such distributions or gains.
INFORMATION ON THE AMOUNT AND TAX CHARACTER OF DISTRIBUTIONS
Each Fund will inform you of the amount of your ordinary income and capital gain dividends at the time they are paid, and will advise you of their tax status for federal income tax purposes shortly after the end of each calendar year. If you have not held Fund shares for a full year, a Fund may designate and distribute to you, as ordinary income, as qualified dividends or as capital gains, and in the case of non-U.S. shareholders, the Fund may further designate and distribute as interest-related dividends and short-term capital gain dividends, a percentage of income that may not be equal to the actual amount of this type of income earned during the period of your investment in the Fund. Taxable distributions declared by a Fund in December but paid in January are taxable to you as if they were paid in December.
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY
Each Fund intends to elect or has elected to be treated as a regulated investment company under Subchapter M of the Code. Each Fund that has been in existence for more than one year has qualified as a regulated investment company for its most recent fiscal year, and intends to continue to qualify during the current fiscal year. As a regulated investment company, a Fund generally pays no federal income tax on the income and gain it distributes to you. The Board of Trustees reserves the right not to maintain the qualification of a Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders. In such a case, the Fund would be subject to federal, and possibly state, corporate taxes on its taxable income and gain, and distributions to you would be taxed as dividend income to the extent of the Fund's earnings and profits.
In order to qualify as a regulated investment company for federal income tax purposes, each Fund must meet certain specific requirements, including:
(i) the Fund must maintain a diversified Fund of securities, wherein no security, including the securities of a qualified publicly traded partnership (other than U.S. government securities and securities of other regulated investment companies) can exceed 25% of the Fund's total assets, and, with respect to 50% of the Fund's total assets, no investment (other than cash and cash items, U.S. government securities and securities of other regulated investment companies) can exceed 5% of the Fund's total assets or 10% of the outstanding voting securities of the issuer;
(ii) the Fund must derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities, or currencies, and net income derived from an interest in a qualified publicly traded partnership; and
(iii) the Fund must distribute to its shareholders at least 90% of its investment company taxable income and net tax-exempt income for each of its fiscal years.
EXCISE TAX DISTRIBUTION REQUIREMENTS
To avoid federal excise taxes, the Code requires a Fund to distribute to you by December 31 of each year, at a minimum, the following amounts: 98% of its taxable ordinary income earned during the calendar year; 98% of its capital gain net income earned during the twelve-month period ending October 31; and 100% of any undistributed amounts from the prior year. Each Fund intends to declare and pay these distributions in December (or to pay them in January, in which case you must treat them as received in December) but can give no assurances that its distributions will be sufficient to eliminate all taxes.
SALES OF FUND SHARES
Sales and exchanges of Fund shares are taxable transactions for federal and state income tax purposes. If you sell your Fund shares, whether you receive cash or exchange them for shares of a different Fund, the IRS requires you to report any gain or loss on your sale or exchange. If you owned your shares as a capital asset, any gain or loss that you realize generally is a capital gain or loss, and is long-term or short-term, depending on how long you owned your shares. Any redemption/exchange fees you incur on shares redeemed or exchanged within 90 days after the date they were purchased will decrease the amount of any capital gain (or increase any capital loss) you realize on the sale or exchange.
SALES AT A LOSS WITHIN SIX MONTHS OF PURCHASE. Any loss incurred on the sale or exchange of Fund shares owned for six months or less is treated as a long-term capital loss to the extent of any long-term capital gains distributed to you by the Fund on those shares.
DEFERRAL OF BASIS. In reporting gain or loss on the sale of your Fund shares, you may be required to adjust your basis in the shares you sell under the following circumstances:
IF:
o In your original purchase of Fund shares, you received a reinvestment
right (the right to reinvest your sales proceeds at a reduced or with
no sales charge), and
o You sell some or all of your original shares within 90 days of their
purchase, and
o You reinvest the sales proceeds in the Fund or in another Fund, and
the sales charge that would otherwise apply is reduced or eliminated;
THEN:
In reporting any gain or loss on your sale, all or a portion of the sales charge that you paid for your original shares is excluded from your tax basis in the shares sold and added to your tax basis in the new shares.
WASH SALES. All or a portion of any loss that you realize on the sale of your Fund shares is disallowed to the extent that you buy other shares in the Fund within 30 days before or after your sale. Any loss disallowed under these rules is added to your tax basis in the new shares.
U.S. GOVERNMENT SECURITIES
The income earned on certain U.S. government securities is exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on these securities, subject in some states to minimum investment or reporting requirements that must be met by a Fund. The income on Fund investments in certain securities, such as repurchase agreements, commercial paper and federal agency-backed obligations (e.g., Government National Mortgage Association (Ginnie Mae) or Federal National Mortgage Association (Fannie Mae) securities), generally does not qualify for tax-free treatment. The rules on exclusion of this income are different for corporations.
QUALIFIED DIVIDEND INCOME FOR INDIVIDUALS
For individual shareholders, a portion of the dividends paid by a Fund may be qualified dividends eligible for taxation at long-term capital gain rates. This reduced rate generally is available for dividends paid by a Fund out of dividends earned on the Fund's investment in stocks of domestic corporations and qualified foreign corporations. Dividends from PFICs are not eligible to be treated as qualified dividend income.
Both the Fund and the investor must meet certain holding period requirements to qualify Fund dividends for this treatment. Specifically, a Fund must hold the stock for at least 61 days during the 121-day period beginning 60 days before the stock becomes ex-dividend. Similarly, investors must hold their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund distribution goes ex-dividend. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of stock is not entitled to receive the dividend payment. When counting the number of days you held your Fund shares, include the day you sold your shares but not the day you acquired these shares.
While the income received in the form of a qualified dividend is taxed at the same rates as long-term capital gains, such income will not be considered as a long-term capital gain for other federal income tax purposes. For example, you will not be allowed to offset your long-term capital losses against qualified dividend income on your federal income tax return. Any qualified dividend income that you elect to be taxed at these reduced rates also cannot be used as investment income in determining your allowable investment interest expense. For other limitations on the amount of or use of qualified dividend income on your income tax return, please contact your personal tax advisor.
After the close of its fiscal year, a Fund will designate the portion of its ordinary dividend income that meets the definition of qualified dividend income taxable at reduced rates. If 95% or more of a Fund's income is from qualified sources, it will be allowed to designate 100% of its ordinary income distributions as qualified dividend income.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS
The portion of dividends paid by a Fund that qualifies for the corporate dividends-received deduction will be designated each year in a notice mailed to the Fund's shareholders, and cannot exceed the gross amount of dividends received by the Fund from domestic (U.S.) corporations that would have qualified for the dividends-received deduction in the hands of the Fund if the Fund was a regular corporation.
The availability of the dividends-received deduction is subject to certain holding period and debt financing restrictions imposed under the Code on the corporation claiming the deduction. The amount that a Fund may designate as eligible for the dividends-received deduction will be reduced or eliminated if the shares on which the dividends earned by the Fund were debt-financed or held by the Fund for less than a minimum period of time, generally 46 days during a 91-day period beginning 45 days before the stock becomes ex-dividend. Similarly, if your Fund shares are debt-financed or held by you for less than a 46-day period then the dividends-received deduction for Fund dividends on your shares may also be reduced or eliminated. Even if designated as dividends eligible for the dividends-received deduction, all dividends (including any deducted portion) must be included in your alternative minimum taxable income calculation.
INVESTMENT IN COMPLEX SECURITIES
Each Fund may invest in complex securities (e.g., futures, options, forward currency contracts, short-sales, PFICs, etc.) that may be subject to numerous special and complex tax rules. These rules could affect whether gain or loss recognized by a Fund is treated as ordinary or capital, or as interest or dividend income. These rules could also accelerate the recognition of income to a Fund (possibly causing the Fund to sell securities to raise the cash for necessary distributions). These rules could defer a Fund's ability to recognize a loss, and, in limited cases, subject the Fund to U.S. federal income tax on income from certain foreign securities. These rules could, therefore, affect the amount, timing, or character of the income distributed to you by a Fund. For example:
Derivatives. A Fund may be permitted to invest in options, futures contracts, options on futures contracts, stock index options and forward currency contracts to hedge a Fund's portfolio or for any other permissible purposes consistent with that Fund's investment objective. If a Fund makes these investments, it could be required to mark-to-market these contracts and realize any unrealized gains and losses at its fiscal year end even though it continues to hold the contracts. Under these rules, gains or losses on the contracts generally would be treated as 60% long-term and 40% short-term gains or losses, but gains or losses on certain foreign currency contracts would be treated as ordinary income or losses. In determining its net income for excise tax purposes, the Fund also would be required to mark-to-market these contracts annually as of October 31 (for capital gain net income and ordinary income arising from certain foreign currency contracts), and to realize and distribute any resulting income and gains.
Constructive Sales. A Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize gain, but not loss, on the position.
Tax Straddles. A Fund's investment in options, futures, forwards, or foreign currency contracts (or in substantially similar or related property) in connection with certain hedging transactions could cause it to hold offsetting positions in securities. If a Fund's risk of loss with respect to specific securities in its portfolio is substantially diminished by the fact that it holds other securities, the Fund could be deemed to have entered into a tax "straddle" or to hold a "successor position" that would require any loss realized by it to be deferred for tax purposes.
Short sales and securities lending transactions. A Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize gain, but not loss, on the position. Additionally, a Fund's entry into securities lending transactions may cause the replacement income earned on the loaned securities to fall outside of the definition of qualified dividend income. This replacement income generally will not be eligible for reduced rates of taxation on qualified dividend income, and, to the extent that debt securities are loaned, will generally not qualify as qualified interest income for foreign withholding tax purposes.
Credit Default Swap Agreements. A Fund may be permitted to enter into credit default swap agreements. The rules governing the tax aspects of swap agreements that provide for contingent nonperiodic payments of this type are in a developing stage and are not entirely clear in certain aspects. Accordingly, while a Fund intends to account for such transactions in a manner deemed to be appropriate, the IRS might not accept such treatment. The Funds intend to monitor developments in this area.
Investment in REMIC residual interests (excess inclusion income). A Fund may invest in residual interests in certain mortgage pooling vehicles formed as real estate mortgage investment conduits ("REMICs"). The portion of the Fund's income received from REMIC residual interests, either directly or through an investment in a REIT that holds such interests or qualifies as a taxable mortgage pool (such income is referred to in the Code as "excess inclusion income") generally is required to be allocated by the Fund to its shareholders in proportion to the dividends paid to such shareholders with the same consequences as if the shareholders received the excess inclusion income directly.
Under these rules, a Fund will be taxed at the highest corporate income tax rate on its excess inclusion income that is allocable to the percentage of its shares held in record name by "disqualified organizations," which are generally certain cooperatives, governmental entities and tax-exempt organizations that are exempt from tax on unrelated business taxable income. To the extent that Fund shares owned by "disqualified organizations" are held in record name by a broker/dealer or other nominee, the broker/dealer or other nominee would be liable for the corporate level tax on the portion of the Fund's excess inclusion income allocable to Fund shares held by the broker/dealer or other nominee on behalf of the "disqualified organizations." The Fund expects that disqualified organizations own their shares. Because this tax is imposed at the Fund level, all shareholders, including shareholders that are not disqualified organizations, will bear a portion of the tax cost associated with the Fund's receipt of excess inclusion income. However, to the extent permissible under the 1940 Act, regulated investment companies such as the Fund are permitted under Treasury Regulations to specially allocate this tax expense to the disqualified organizations to which it is attributable, without a concern that such an allocation will constitute a preferential dividend.
Investments in securities of uncertain tax character. A Fund may invest in securities the U.S. Federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by a Fund, it could affect the timing or character of income recognized by the Fund, requiring the Fund to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Code.
BACKUP WITHHOLDING
By law, each Fund must withhold a portion of your taxable distributions and redemption proceeds unless you provide your correct social security or taxpayer identification number, certify that this number is correct, certify that you are not subject to backup withholding, and certify that you are a U.S. person (including a U.S. resident alien). A Fund also must withhold if the IRS instructs it to do so. When withholding is required, the rate will be 28% of any distributions or proceeds paid.
NON-U.S. INVESTORS
Non-U.S. Investors may be subject to U.S. withholding and estate tax and are subject to special U.S. tax certification requirements. Foreign persons should consult their tax advisors about the applicability of U.S. tax withholding and the use of the appropriate forms to certify their status.
In general. The United States imposes a flat 30% withholding tax (or lower treaty rate) on U.S. source dividends.
Capital Gain Dividends & Short-Term Capital Gain Dividends. In general, capital gain dividends paid by a Fund from either long-term or short-term capital gains (other than gain realized on disposition of U.S. real property interests) are not subject to U.S. withholding tax unless you are a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year.
Interest-Related Dividends. Interest-related dividends paid by a Fund from
qualified interest income are not subject to U.S. withholding tax. "Qualified
interest income" includes, in general, U.S. source (1) bank deposit interest,
(2) short-term original discount and (3) interest (including original issue
discount, market discount, or acquisition discount) on an obligation which is in
registered form, unless it is earned on an obligation issued by a corporation or
partnership in which the Fund is a 10-percent shareholder or is contingent
interest, and (4) any interest-related dividend from another regulated
investment company. While each Fund makes every effort to disclose any amounts
of interest-related dividends distributed to its non-U.S. shareholders,
intermediaries who have assumed tax reporting responsibilities on these
distributions may not have fully developed systems that will allow these tax
withholding benefits to be passed through to them.
Sunset Date for Short-Term Capital Gain Dividends and Interest-Related Dividends. The exemption from withholding for short-term capital gain dividends and interest-related dividends paid by a Fund is effective for dividends paid with respect to taxable years of the Fund beginning after December 31, 2004 and before January 1, 2008, unless such exemption is extended or made permanent.
Other. Ordinary dividends paid by a Fund to non-U.S. investors on the
income earned on portfolio investments in (i) the stock of domestic and foreign
corporations, and (ii) the debt of foreign issuers continue to be subject to
U.S. withholding tax. If you hold your Fund shares in connection with a U.S.
trade or business, your income and gains will be considered effectively
connected income and taxed in the U.S. on a net basis, in which case you may be
required to file a nonresident U.S. income tax return.
U.S. Estate Tax. A partial exemption from U.S estate tax may apply to stock in a
Fund held by the estate of a nonresident decedent. The amount treated as exempt
is based upon the proportion of the assets held by a Fund at the end of the
quarter immediately preceding the decedent's death that are debt obligations,
deposits, or other property that would generally be treated as situated outside
the United States if held directly by the estate. This provision applies to
decedents dying after December 31, 2004 and before January 1, 2008, unless such
provision is extended or made permanent.
Investment in U.S. real property. In addition, a Fund may invest in securities of corporations or real estate investment trusts (REITs) that invest in real property. The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) makes non-U.S. persons subject to U.S. tax on disposition of a U.S. real property interest as if he or she were a U.S. person. Such gain is sometimes referred to as FIRPTA gain. To the extent that the Fund realizes a gain on its investment in a U.S. real property interest, or receives a distribution from the gain on the sale of a U.S. real property interest realized on one of its investments, and passes that gain through to its shareholders, such a distribution when made to a non-U.S. shareholder may be subject to U.S. withholding tax at a rate of 35% and may require the filing of a nonresident U.S. income tax return.
U.S Tax Certification Rules. Special U.S. tax certification requirements apply to non-U.S. shareholders both to avoid U.S. back up withholding imposed at a rate of 28% and to obtain the benefits of any treaty between the United States and the shareholder's country of residence. In general, a non-U.S. shareholder must provide a Form W-8 BEN (or other applicable Form W-8) to establish that you are not a U.S. person, to claim that you are the beneficial owner of the income and, if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a country with which the United States has an income tax treaty. A Form W-8BEN provided without a U.S. taxpayer identification number will remain in effect for a period beginning on the date signed and ending on the last day of the third succeeding calendar year unless an earlier change of circumstances makes the information on the form incorrect.
ADDITIONAL TAX INFORMATION WITH RESPECT TO GARTMORE TAX-FREE INCOME FUND
The tax information described in "Additional General Tax Information for All Funds" above applies to the Gartmore Tax-Free Income Fund, except as noted in this section.
EXEMPT-INTEREST DIVIDENDS
By meeting certain requirements of the Code, the Fund qualifies to pay exempt-interest dividends to you. These dividends are derived from interest income exempt from regular federal income tax, and are not subject to regular federal income tax when they are paid to you. In addition, to the extent that exempt-interest dividends are derived from interest on obligations of a state or its political subdivisions, or from interest on qualifying U.S. territorial obligations (including qualifying obligations of Puerto Rico, the U.S. Virgin Islands and Guam), they also may be exempt from that state's personal income taxes. Most states, however, do not grant tax-free treatment to interest on state and municipal securities of other states.
DIVIDENDS FROM TAXABLE INCOME
The Fund may earn taxable income from many sources, including income from temporary investments, discount from stripped obligations or their coupons, income from securities loans or other taxable transactions, and ordinary income from the sale of market discount bonds. If you are a taxable investor, any distributions by the Fund from this income will be taxable to you as ordinary income, whether you receive them in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS AND GAIN OR LOSS ON SALE OR EXCHANGE OF YOUR FUND SHARES
The Fund may realize a capital gain or loss on sale of portfolio securities. Distributions of capital gains are taxable to you. Distributions from net short-term capital gain will be taxable to you as ordinary income. Distributions from net long-term capital gain will be taxable to you as long-term capital gain, regardless of how long you have held your shares in the Fund.
When you sell your shares in the Fund, you may realize a capital gain or loss, which is subject to federal income tax. For tax purposes, an exchange of your Fund shares for shares of a different Gartmore Fund is the same as a sale.
INFORMATION ON THE AMOUNT AND TAX CHARACTER OF DISTRIBUTIONS
The Fund will inform you of the amount of your taxable ordinary income and capital gain dividends at the time they are paid, and will advise you of their tax status for federal income tax purposes shortly after the end of each calendar year, including the portion of the distributions that on average are comprised of taxable income or interest income that is a tax preference item when determining your alternative minimum tax. If you have not held Fund shares for a full year, the Fund may designate and distribute to you, as taxable, as tax-exempt or as tax preference income, a percentage of income that may not be equal to the actual amount of this type of income earned by the Fund during the period of your investment in the Fund. Taxable distributions declared by the Fund in December but paid in January are taxed to you as if made in December.
REDEMPTION AT A LOSS WITHIN SIX MONTHS OF PURCHASE
Any loss incurred on the redemption or exchange of shares held for six months or less will be disallowed to the extent of any exempt-interest dividends paid to you with respect to your Fund shares, and any remaining loss will be treated as a long-term capital loss to the extent of any long-term capital gain distributed to you by the Fund on those shares.
QUALIFIED DIVIDEND INCOME FOR INDIVIDUALS
Because the Fund's income is derived primarily from interest rather than dividends, none of its distributions are expected to be qualified dividends eligible for taxation by individuals at long-term capital gain rates.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS
Because the Fund's income is derived primarily from interest rather than dividends, none of its distributions are expected to qualify for the corporate dividends-received deduction.
ALTERNATIVE MINIMUM TAX
Interest on certain private activity bonds, while exempt from regular federal income tax, is a preference item for you when determining your alternative minimum tax under the Code and under the income tax provisions of several states. Private activity bond interest could subject you to or increase your liability under the federal and state alternative minimum taxes, depending on your personal or corporate tax position. If you are a person defined in the Code as a substantial user (or person related to a user) of a facility financed by private activity bonds, you should consult with your tax adviser before buying shares of the Fund.
TREATMENT OF INTEREST ON DEBT INCURRED TO HOLD FUND SHARES
Interest on debt you incur to buy or hold Fund shares may not be deductible for federal income tax purposes.
LOSS OF STATUS OF SECURITIES AS TAX-EXEMPT
Failure of the issuer of a tax-exempt security to comply with certain legal or contractual requirements relating to the security could cause interest on the security, as well as Fund distributions derived from this interest, to become taxable, perhaps retroactively to the date the security was issued.
ADDITIONAL TAX INFORMATION WITH RESPECT TO THE MONEY MARKET FUND
The tax information described in "Additional General Tax Information for All Funds" above applies to the Money Market Fund, except as noted in this section.
DISTRIBUTIONS OF NET INVESTMENT INCOME
The Money Market Fund typically declares dividends from its daily net income each day that its NAV is calculated, and pays such dividends monthly. The Money Market Fund's daily net income includes accrued interest and any original issue or acquisition discount, plus or minus any gain or loss on the sale of portfolio securities and changes in unrealized appreciation or depreciation in portfolio securities (to the extent required to maintain a stable $1 share price), less the estimated expenses of the Money Market Fund. Any distributions by the Money Market Fund from such income will be taxable to you as ordinary income, whether you receive them in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAIN
The Money Market Fund may derive capital gain or loss in connection with sales or other dispositions of its portfolio securities. If you are a taxable investor, distributions from net short-term capital gain will be taxable to you as ordinary income. Because the Money Market Fund is a money market fund, it is not expected to realize any long-term capital gain.
MAINTAINING A $1 SHARE PRICE
Gain and loss on the sale of portfolio securities and unrealized appreciation or depreciation in the value of these securities may require the Money Market Fund to adjust distributions, including withholding dividends, to maintain its $1 share price. These procedures may result in under- or over-distributions by the Money Market Fund of its net investment income.
REDEMPTION OF FUND SHARES
Redemptions (including redemptions in kind) and exchanges of Money Market Fund shares are taxable transactions for federal and state income tax purposes. Because the Money Market Fund tries to maintain a stable $1 share price, however, you should not expect to realize any capital gain or loss on the sale or exchange of your shares. For tax purposes, an exchange of your Money Market Fund shares for shares of a different Gartmore Fund is the same as a sale.
QUALIFIED DIVIDEND INCOME FOR INDIVIDUALS
Because the Money Market Fund's income is derived primarily from interest rather than dividends, none of its distributions are expected to be qualified dividends eligible for taxation by individuals at long-term capital gain rates.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS
Because the Money Market Fund's income is derived primarily from interest rather than dividends, none of its distributions are expected to qualify for the corporate dividends-received deduction.
ADDITIONAL INFORMATION FOR THE FUNDS OF FUNDS
Each of the Funds of Funds invests in one or more Underlying Funds. The tax consequences of an investment in a Fund of Funds are generally the same as the consequences of investment in a non-Fund of Funds, except as noted below.
DISTRIBUTIONS OF NET INVESTMENT INCOME
A Fund of Funds' income consists of dividends it receives from the Underlying Funds, less the estimated expenses of the Fund of Funds. Any distributions by a Fund of Funds from such income (other than qualified dividend income received by individuals) will be taxable to you as ordinary income, whether you receive them in cash or additional shares. A portion of the income dividends paid to you may be qualified dividends eligible to be taxed at reduced rates.
DISTRIBUTIONS OF CAPITAL GAIN
An Underlying Fund may realize capital gain or loss in connection with sales or other dispositions of its portfolio securities. Any net capital gains may be distributed to a Fund of Funds as capital gain distributions. A Fund of Funds may also derive capital gains and losses in connection with sales of shares of the Underlying Funds. Distributions from net short-term capital gains are taxable to you as ordinary income. Distributions from net long-term capital gains are taxable to you as long-term capital gains, regardless of how long you have owned your shares in a Fund of Funds. Capital gain will be distributed by a Fund of Funds once each year, and may be distributed more frequently, if necessary, to reduce or eliminate excise or income taxes on the Fund of Funds.
EFFECT OF FOREIGN INVESTMENTS ON DISTRIBUTIONS
Most foreign exchange gain realized on the sale of debt securities is treated as ordinary income by an Underlying Fund. Similarly, foreign exchange loss realized on the sale of debt securities by an Underlying Fund generally is treated as ordinary loss. This gain when distributed will be taxable to the Fund of Funds as ordinary income, and any loss will reduce an Underlying Fund's ordinary income otherwise available for distribution to the Fund of Funds. This treatment could increase or decrease an Underlying Fund's ordinary income distributions to a Fund of Funds and, in turn, to you, and may cause some or all of the Underlying Fund's previously distributed income to be classified as a return of capital to the Fund of Funds. A return of capital generally is not taxable to a Fund of Funds, but reduces the Fund of Funds' tax basis in its shares of the Underlying Fund. Any return of capital in excess of the Fund of Funds' tax basis is taxable to the Fund of Funds as a capital gain.
Certain Underlying Funds may be subject to foreign withholding taxes on income from certain foreign securities. This could reduce such an Underlying Fund's ordinary income distributions to a Fund of Funds and, in turn, to you.
U.S. GOVERNMENT SECURITIES
The income earned on certain U.S. government securities is generally exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on these securities, subject in some states to minimum investment or reporting requirements that must be met by a Fund of Funds. Dividends paid by a Fund of Funds may not be exempt from state and local taxes in certain states when the Fund of Fund invests in U.S. government securities only indirectly by investing in an Underlying Fund.
MAJOR SHAREHOLDERS
As of October 31, 2006, the Trustees and Officers of the Trust as a group owned beneficially less than 1% of the shares of the Trust, and less than 1% of any class of shares of any Fund, with the exception of the following:
PERCENT OF THE
TOTAL CLASS
HELD BY
TRUSTEES AND OFFICERS
FUND/CLASS NO. OF SHARES AS A GROUP
---------- ------------- ---------------------
Gartmore Emerging Markets Fund - Class A 20,174.457 1.66%
Gartmore Nationwide Leaders Fund - Class A 11,783.055 2.58%
Gartmore Global Natural Resources Fund - Class A 6,245.665 22.00%
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As of February 2, 2007, the following shareholders held five percent or greater of the shares of a class of a Fund:
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES 478924.621 39.39%
CORP.
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 176932.591 14.55%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
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---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 170250.115 14.00%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 13765.707 48.67%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
JEFFREY L BROE 2611.821 9.23%
IRA
702 JENNY ANN CT
HERNDON VA 201703152
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RAYMOND C BALDWIN 2609.603 9.23%
TOD
105 MALLARDS COVE
VASS NC 28394
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GARTMORE BOND FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 73862.076 71.86%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
UBS FINANCIAL SERVICES INC. 14241.542 13.85%
1000 HARBOR BLVD
8TH FL, COMPLIANCE DEPARTMENT
WEEHAWKEN NJ 07086
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND FUND CLASS D
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 2397311.425 28.21%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND FUND CLASS X
---------------------------------------------------------------- -------------------------- ---------------------------
BEATRICE BERGER 24212.674 13.00%
TOD
670 APPLE ST
RED HILL PA 180761355
---------------------------------------------------------------- -------------------------- ---------------------------
FRANK W DEIS 12406.942 6.66%
DEBRA A DEIS
JTWROS TOD
7559 APPALACHIAN TRL E
HARRISBURG PA 171129400
---------------------------------------------------------------- -------------------------- ---------------------------
ROBERT R WARR 11272.644 6.05%
RUTH G WARR
JTWROS
2228 HUNTINGTON RD
AUGUSTA GA 30904
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---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND FUND CLASS Y
---------------------------------------------------------------- -------------------------- ---------------------------
DAVID F RICHMOND 3661.172 23.10%
GLENNA M RICHMOND
JTWROS
114 OLD GRANDVIEW RD
BEAVER WV 25813
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2218.313 14.00%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
DONNA J GARST 1906.741 12.03%
IRA
718 WARREN AVE
BELPRE OH 45714
---------------------------------------------------------------- -------------------------- ---------------------------
GREGORY G BOLING 1090.789 6.88%
ROLLOVER IRA
1100 WILLOWOOD RD
KNOXVILLE TN 37922
---------------------------------------------------------------- -------------------------- ---------------------------
BLAINE T GORDON 1075.139 6.78%
DONNA GORDON
JTWROS
7063 PIGEON COVE RD
NEEDMORE PA 17238
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 117.278 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND INDEX FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 2541595.582 64.78%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 956541.635 24.38%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND INDEX FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
VALERIE FOLLETT 7630.659 37.42%
TOD
122 INDIAN TRAIL S
WAKEFIELD RI 02879
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 4234.001 20.77%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
DAVID R BUNNELL 1248.538 6.12%
ROLLOVER IRA
5 WETOMACHICK AVE
WESTERLY RI 02891
---------------------------------------------------------------- -------------------------- ---------------------------
SUELLEN S OLSON 1242.698 6.09%
ROTH IRA
PO BOX 527
ALBANY IL 61230
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND INDEX FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
DERNELL MCGHEE 193.236 39.99%
IRA
5 OGDEN LN
ENGLISHTOWN NJ 07726
---------------------------------------------------------------- -------------------------- ---------------------------
MARY M PELLEGRINO 144.974 30.00%
IRA
56 OAK GLEN RD
TOMS RIVER NJ 08753
---------------------------------------------------------------- -------------------------- ---------------------------
ANTHONY PELLEGRINO 144.974 30.00%
IRA
56 OAK GLEN RD
TOMS RIVER NJ 08753
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE BOND INDEX FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 60466169.413 29.34%
INVESTOR DESTINATIONS MODERATE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATE 36452301.255 17.69%
C/O BISYS FUND SERV
3435 STELZER RD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 27562538.812 13.38%
INVESTOR DESTINATIONS MODERATELY
AGGRESSIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATELY 21965770.693 10.66%
AGGRESSIVE
C/O BISYS FUND SERV
3435 STELZER RD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 20830252.494 10.11%
INVESTOR DESTINATIONS MODERATELY
CONSERVATIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 11187580.451 5.43%
INVESTOR DESTINATIONS CONSERVATIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATELY 11036084.944 5.36%
CONSERVATIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE CHINA OPPORTUNITIES FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 245717.03 18.82%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 179308.114 13.73%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281--1003
---------------------------------------------------------------- -------------------------- ---------------------------
BROWN BROTHERS HARRIMAN & CO. 162000 12.41%
140 BROADWAY
NEW YORK NY 10005-1101
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 143303.128 10.98%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
WILLIAM P DIRUGERIS 128678.978 9.86%
ROLLOVER IRA
15 TEABERRY LN
BLUFFTON SC 29909
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE CHINA OPPORTUNITIES FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 21726.731 19.61%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 17316.376 15.63%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 8863.275 8.00%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 7172.094 6.47%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE CHINA OPPORTUNITIES FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 196319.471 40.83%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
SOUTHWEST SECURITIES, INC. 94787.718 19.71%
1201 ELM ST
SUITE 3500
DALLAS TX 75209
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 68885.289 14.33%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 35364.624 7.35%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES 24261.383 5.05%
LLC
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE CHINA OPPORTUNITIES FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 595047.495 99.99%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE CHINA OPPORTUNITIES FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 338.31 74.13%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 118.077 25.87%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE CHINA OPPORTUNITIES FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 52857.034 92.65%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
CAMCO 3523.366 6.18%
80 WEST STREET STE 201
RUTLAND VT 05701
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE EMERGING MARKETS FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 694781.152 26.44%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 676814.225 25.76%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 417689.24 15.90%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 171197.902 6.51%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 150722.812 5.74%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE EMERGING MARKETS FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 231133.869 56.96%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 83651.906 20.61%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE EMERGING MARKETS FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 342125.221 71.11%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 40204.662 8.36%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE EMERGING MARKETS FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 421311.081 76.60%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 56723.857 10.31%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 40160.09 7.30%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 31716.145 5.77%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE EMERGING MARKETS FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 34946.216 97.93%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE EMERGING MARKETS FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 100154.118 78.73%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
---------------------------------------------------------------- -------------------------- ---------------------------
DRAKE & CO 27064.72 21.27%
1 COURT SQ 22ND FL
FBO 15C061519768
LONG ISLAND CITY NY 11120
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE ENHANCED INCOME FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 70889.482 47.50%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 24317.465 16.29%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 22367.927 14.99%
ONE BEACON STREET
22ND FLOOR
BOSTON MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
ELEANOR G O'NEIL 9507.839 6.37%
CHARLES J O'NEIL
JTWROS
3 VALLEY VIEW DR
EAST GRANBY CT 060269585
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE ENHANCED INCOME FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 12105915.717 29.67%
INVESTOR DESTINATIONS MODERATE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATE 8564765.553 20.99%
C/O BISYS FUND SERV
3435 STELZER RD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 6343352.792 15.55%
INVESTOR DESTINATIONS MODERATELY
CONSERVATIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 4767391.244 11.68%
INVESTOR DESTINATIONS CONSERVATIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATELY 4005572.617 9.82%
CONSERVATIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS CONSERVATIVE 3273383.913 8.02%
C/O BISYS FUND SERV
3435 STELZER RD
COLUMBUS OH 43219-
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE ENHANCED INCOME FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 117.34 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE ENHANCED INCOME FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
MORLEY CAPITAL MANAGEMENT 1312.464 100.00%
1200 RIVER RD STE 1000
ATTN DANIEL BRZEZINSKI
CONSHOHOCKEN PA 19428-2442
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL FINANCIAL SERVICES FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 373525.409 22.72%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 208457.524 12.68%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 195889.296 11.91%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 174451.589 10.61%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 171759.983 10.45%
ONE BEACON STREET
22ND FLOOR
BOSTON MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 106763.305 6.49%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL FINANCIAL SERVICES FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 96897.512 47.36%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 13638.978 6.67%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 11609.449 5.67%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 11254.635 5.50%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
OPPENHEIMER & CO.INC. 10441.413 5.10%
125 BROAD STREET
15 TH FL
NEW YORK NY 10004
---------------------------------------------------------------- -------------------------- ---------------------------
RBC DAIN RAUSCHER INC. 10338.333 5.05%
60 SOUTH SIXTH STREET
MINNEAPOLIS MN 55402
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL FINANCIAL SERVICES FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 98160.259 23.54%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 97054.667 23.27%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 62134.134 14.90%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL FINANCIAL SERVICES FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 781647.844 65.79%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 174852.507 14.72%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 146718.463 12.35%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 81523.255 6.86%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL FINANCIAL SERVICES FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 706.252 87.19%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 103.782 12.81%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL FINANCIAL SERVICES FUND INSTITUTIONAL
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 99320.475 100.00%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL HEALTH SCIENCES FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 284076.17 31.60%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 237597.339 26.43%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 100034.963 11.13%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 65452.05 7.28%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 63567.736 7.07%
ONE BEACON STREET
22ND FLOOR
BOSTON MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL HEALTH SCIENCES FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 100346.867 74.63%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 9462.804 7.04%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 7400.237 5.50%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL HEALTH SCIENCES FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 116900.383 80.22%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL HEALTH SCIENCES FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 868400.179 69.09%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 175150.528 13.94%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 124031.809 9.87%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 85711.286 6.82%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL HEALTH SCIENCES FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 110.49 100.00%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL HEALTH SCIENCES FUND INSTITUTIONAL SERVICE
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 99917.233 100.00%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL NATURAL RESOURCES FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 227672.896 22.01%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 208177.832 20.13%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 117907.605 11.40%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281--1003
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 58324.36 5.64%
ONE BEACON STREET
22ND FLOOR
BOSTON MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL NATURAL RESOURCES FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 28208.23 27.10%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 16004.13 15.38%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 9685.286 9.31%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
LO-AN PHAM 8895.713 8.55%
LO-AN PHAM REVOCABLE TRUST
U/A/D 12141990
640 SAXONY BLVD
ST PETERSBURG FL 33716
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 7216.091 6.93%
ONE BEACON STREET
22ND FLOOR
BOSTON MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL NATURAL RESOURCES FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 212476.244 38.97%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 97086.421 17.81%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 56739.469 10.41%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281--1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL NATURAL RESOURCES FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 388958.772 45.02%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 293751.035 34.00%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219--6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 67305.192 7.79%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219--6004
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 53703.874 6.22%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219--6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL NATURAL RESOURCES FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 34740.696 98.21%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL NATURAL RESOURCES INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 19289.088 91.03%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
WELLS FARGO INVESTMENTS, LLC 1771.652 8.36%
625 MARQUETTE AVENUE SOUTH
12TH FLOOR
MINNEAPOLIS MN 55402
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL TECHNOLOGY & COMMUNICATIONS FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 303639.076 34.60%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 112228.832 12.79%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 88451.967 10.08%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL INVESTOR SERVICES CORP. 61498.719 7.01%
55 WATER STREET
NEW YORK NY 10041
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL TECHNOLOGY & COMMUNICATIONS FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 180765.847 54.71%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 63589.417 19.25%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL TECHNOLOGY & COMMUNICATIONS FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 39195.719 77.70%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
RICHARD A JONES 4196.012 8.32%
BARBARA J JONES
JTWROS
13115 56TH AVE N
PLYMOUTH MN 55442
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL TECHNOLOGY & COMMUNICATIONS FUND INSTITUTIONAL
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 1993846.898 75.83%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219--6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 291981.703 11.10%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 183902.583 6.99%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 155274.281 5.91%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL TECHNOLOGY & COMMUNICATIONS FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 271.796 100.00%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL TECHNOLOGY & COMMUNICATIONS FUND INSTITUTIONAL
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 248.219 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL UTILITIES FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 285724.744 37.77%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 99959.53 13.21%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 70518.555 9.32%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 62993.821 8.33%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 52295.075 6.91%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 44438.576 5.87%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL UTILITIES FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 97681.401 55.41%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 23948.479 13.58%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 13803.101 7.83%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
RBC DAIN RAUSCHER INC. 9421.504 5.34%
60 SOUTH SIXTH STREET
MINNEAPOLIS MN 55402
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL UTILITIES FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 219126.325 42.87%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 140558.983 27.50%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 97848.438 19.14%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL UTILITIES FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 302906.682 65.70%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 73227.402 15.88%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 51889.513 11.25%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 30746.029 6.67%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL UTILITIES FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 423.023 74.71%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 143.164 25.29%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GLOBAL UTILITIES FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 100822.844 99.91%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 2357603.921 79.57%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 21872.228 63.89%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
JOSEPH W PUTNAK 5370.501 15.69%
ROLLOVER IRA
617 INDIANA ST
MONONGAHELA PA 15063
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 162474.444 92.85%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND CLASS D
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 4762591.103 55.43%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 647857.349 7.54%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND CLASS X
---------------------------------------------------------------- -------------------------- ---------------------------
BETTY A CONNER 23865.908 13.53%
6945 BLACK WALNUT ST
ROANOKE VA 24019
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND CLASS Y
---------------------------------------------------------------- -------------------------- ---------------------------
JOYCE L RICE 19500.61 23.84%
ROSILAND KNIGHT
JORDAN R RICE
4434 CATAMOUNT DR
LILBURN GA 30047
---------------------------------------------------------------- -------------------------- ---------------------------
JOYCE L RICE 19438.706 23.77%
ROSILAND KNIGHT
DARIAN J RICE
4434 CATAMOUNT DR
LILBURN GA 30047
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 15269.72 18.67%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
THOMAS E FREECE 5027.471 6.15%
TOD
1029 CARDINAL RD
AUDUBON PA 19403-2203
---------------------------------------------------------------- -------------------------- ---------------------------
CONSTANCE J WESTREICH 5014.191 6.13%
TOD
725 A HERITAGE VILLAGE
SOUTHBURY CT 06488
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 103.344 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GOVERNMENT BOND FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 106.913 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GROWTH FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 279985.441 15.98%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 220165.132 12.56%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GROWTH FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 66289.92 54.94%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
MORGAN STANLEY DW INC. 21577.553 17.88%
2000 WESTCHESTER AVE LD
PURCHASE NY 10577
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 11972.285 9.92%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GROWTH FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 158.266 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GROWTH FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 173.93 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE GROWTH FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 157.164 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL GROWTH FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 550801.613 16.36%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 492391.879 14.62%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 491297.199 14.59%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 349780.675 10.39%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
MG TRUST COMPANY CUST FBO 264311.733 7.85%
H HEYWARD BURNET CPA
700 17TH STREET
SUITE 300
DENVER CO 80202
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 245098.281 7.28%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 190923.038 5.67%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL GROWTH FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 348458.357 65.05%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 93642.344 17.48%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL GROWTH FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 822505.571 66.07%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 99311.073 7.98%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 82381.107 6.62%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 78970.453 6.34%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL GROWTH FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 211531.37 44.52%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 174770.318 36.78%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 88747.878 18.68%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL GROWTH FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 414.782 74.11%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 144.921 25.89%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL GROWTH FUND INSTITUTIONAL SERVICE
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 351062.003 96.98%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL INDEX FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 10648381.741 79.06%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 2350932.006 17.45%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL INDEX FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 26493.039 46.03%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 9355.417 16.25%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 4610.32 8.01%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL INDEX FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 42497.715 46.65%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
WELLS FARGO INVESTMENTS, LLC 19795.266 21.73%
625 MARQUETTE AVENUE SOUTH
12TH FLOOR
MINNEAPOLIS MN 55402
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 10111.679 11.10%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 7222.431 7.93%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
WELLS FARGO INVESTMENTS, LLC 5513.544 6.05%
625 MARQUETTE AVENUE SOUTH
12TH FLOOR
MINNEAPOLIS MN 55402
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INTERNATIONAL INDEX FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS MODERATELY 43746338.846 22.87%
AGGRESSIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATELY 35103753.78 18.35%
AGGRESSIVE
C/O BISYS FUND SERV
3435 STELZER RD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 34691479.191 18.14%
INVESTOR DESTINATIONS MODERATE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS AGGRESSIVE 26352393.669 13.78%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATE 21338372.271 11.15%
C/O BISYS FUND SERV
3435 STELZER RD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT 19890855.084 10.40%
INVESTOR DESTINATIONS AGRESSIVE
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS OH 43219-
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2319295.941 33.41%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 992198.746 14.29%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 881896.169 12.70%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 402370.694 5.80%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 524708.186 30.50%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 423157.222 24.59%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 105032.043 6.10%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 7088429.025 72.18%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 649807.646 6.62%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND INSTITUTIONAL
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 2063260.258 99.47%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 268556.418 62.80%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 115715.79 27.06%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
JOEL EBERT FBO 42184.536 9.86%
EBERT MACHINE CO INC PROFIT
SHARING PLAN
2177 S STATE ROAD 19
PERU IN 46970
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS AGGRESSIVE FUND SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 35867427.226 53.40%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 27822076.216 41.42%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 3735523.41 41.27%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 1528239.663 16.88%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 566114.033 6.25%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 497416.538 5.50%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1201312.11 32.05%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 735983.398 19.64%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 220150.978 5.87%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 209535.49 5.59%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 13995490.273 74.28%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 4781658.557 100.00%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 372651.069 60.76%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 227639.29 37.11%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY AGGRESSIVE FUND
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 56800600.062 55.42%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 39795547.634 38.83%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATE FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2780642.56 41.52%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 1398510.923 20.88%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 373970.945 5.58%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATE FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1521430.714 45.51%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 531190.442 15.89%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 190427.057 5.70%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATE FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 13671093.649 73.57%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATE FUND INSTITUTIONAL
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 5806435.111 99.12%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATE FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 506136.018 66.73%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 234847.553 30.97%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATE FUND SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 45540498.084 42.59%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 32917172.235 30.78%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 27435821.45 25.66%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 667038.225 25.50%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 588690.487 22.51%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
LASALLE BANK NA 578621.434 22.12%
THE AGILYSYS INC NON-QUALIFIED PLANS
BENEFIT SECURITY TRUST
2801 LAKESIDE DR STE 215
C/O THE GILES ORGANIZATION
BANNOCKBURN IL 60015
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 327550.013 45.14%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 128689.933 17.73%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2842585.067 70.36%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 209332.929 5.18%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 879022.08 99.99%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 104780.018 61.24%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 61736.833 36.09%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS MODERATELY CONSERVATIVE FUND
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 15276729.69 64.56%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 6357301.057 26.87%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 1796588.258 7.59%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
WELLS FARGO BANK NA 919378.941 50.30%
CB RICHARD ELLIS INC
5000403000
PO BOX 1533
MINNEAPOLIS MN 55480
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 339709.061 18.59%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 209273.792 11.45%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 97933.282 5.36%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 165533.621 44.01%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 88487.652 23.53%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 19616.79 5.22%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 19455.9 5.17%
ONE BEACON STREET
22ND FLOOR
BOSTON MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1356216.198 73.11%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 202279.802 10.90%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND INSTITUTIONAL
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 410193.742 99.97%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 132096.628 70.76%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 49966.028 26.77%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE INVESTOR DESTINATIONS CONSERVATIVE FUND SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 11412135.52 69.25%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 3562453.342 21.62%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 1383494.443 8.40%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE LARGE CAP VALUE FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 1114476.15 55.33%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 274091.702 13.61%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 196307.073 9.75%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 189201.359 9.39%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE LARGE CAP VALUE FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 34023.947 26.53%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
A G EDWARDS SONS C F 7834.858 6.11%
JULIA SYNHORST
SEP IRA ACCOUNT
4324 MULFORD AVENUE
SACRAMENTO CA 958213323
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE LARGE CAP VALUE FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 386670.501 72.24%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 107283.465 20.04%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE LARGE CAP VALUE FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
ANTHONY A MCPHERRON KRISTINA A MCPHERRON FBO 10588.954 98.83%
SPECIALTY ORTHOPEDICS 401 K PLAN
SUITE 111
1919 LAKE AVENUE
PLYMOUTH IN 46563
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MICRO CAP EQUITY FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1324483.113 47.98%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 297832.438 10.79%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 150620.229 5.46%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MICRO CAP EQUITY FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 220816.779 58.15%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 30229.748 7.96%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
A G EDWARDS SONS C F 23148.089 6.10%
JULIA SYNHORST
SEP IRA ACCOUNT
4324 MULFORD AVENUE
SACRAMENTO CA 958213323
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 20836.179 5.49%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MICRO CAP EQUITY FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1225889.343 65.80%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 165908.247 8.91%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
A G EDWARDS SONS C F 160495.25 8.61%
JULIA SYNHORST
SEP IRA ACCOUNT
4324 MULFORD AVENUE
SACRAMENTO CA 958213323
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MICRO CAP EQUITY FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 394971.859 52.76%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
ICMA-RC SERVICES, LLC 330558.099 44.16%
777 NORTH CAPITOL STREET NE
WASHINGTON DC 20002
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MICRO CAP EQUITY FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 83.678 100.00%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MICRO CAP EQUITY FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
HERSHEY TRUST COMPANY 13914.54 79.09%
100 MANSION RD EAST
HERSHEY PA 170330445
---------------------------------------------------------------- -------------------------- ---------------------------
MITRA CO FBO 98 3605.327 20.49%
C O MARSHALL ILSLEY TRUST CO NA
11270 WEST PARK PLACE
ATTN MUTUAL FUNDS
SUITE 400 - PPW - 08 WM
MILWAUKEE WI 53224
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 46229.591 29.70%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
W.G. JURGENSEN 26189.224 16.83%
TOD
ONE NATIONWIDE PLAZA 1-37-04
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
ROBERT D GLISE 12228.705 7.86%
ROLLOVER IRA
9245 KELLY LAKE DR
CLARKSTON MI 48348
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 4997.168 38.58%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281--1003
---------------------------------------------------------------- -------------------------- ---------------------------
WILLIAM A MOORE 1292.039 9.97%
PO BOX 49
POLK CITY IA 50226
---------------------------------------------------------------- -------------------------- ---------------------------
BRADLEY K HENRY 842.673 6.51%
ROTH IRA
526 JEFFERSON LN
GEORGETOWN TX 78626
---------------------------------------------------------------- -------------------------- ---------------------------
MELISSA P ARTHUR 770.585 5.95%
ROLLOVER IRA
2191 RIVER RD
SOUTH BOSTON VA 24592
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 28390.848 78.94%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 2180.346 6.06%
ONE PERSHING PLAZA
PRODUCT SUPPORT, 14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 120456.531 46.35%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 80730.433 31.07%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219--6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 58681.751 22.58%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219--6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 92.426 78.71%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 24.994 21.29%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH LEADERS FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 68387.246 16.22%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 45143.602 10.70%
C/O IPO PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH LEADERS FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 31463.536 65.97%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 5288.281 11.09%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
OPPENHEIMER & CO. INC. 2885.454 6.05%
125 BROAD STREET
15 TH FL
NEW YORK NY 10004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH LEADERS INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE MUTUAL INSURANCE COMPANY 961837.504 99.99%
ATTN KEVIN KING
1 NATIONWIDE PLZ 1-33-13
COLUMBUS OH 43215-2220
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP GROWTH LEADERS FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 87.184 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP MARKET INDEX FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 8334146.087 66.55%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 3499514.667 27.95%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP MARKET INDEX FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 14171.829 21.95%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 8285.341 12.83%
ONE BEACON STREET
22ND FLOOR
BOSTON, MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 7262.511 11.25%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
A. G. EDWARDS & SONS, 4829.886 7.48%
INC. ONE NORTH JEFFERSON AVE.
SAINT LOUIS MO 63103
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 4327.625 6.70%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP MARKET INDEX FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 29309.639 50.13%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 20228.259 34.60%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MID CAP MARKET INDEX FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATELY AGGRESSIVE 14746339.157 19.58%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS MODERATELY AGGRESSIVE 14155844.012 18.80%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS MODERATE 12619216.048 16.76%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATE 9987226.586 13.26%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS AGGRESSIVE 9165885.644 12.17%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS AGGRESSIVE 6377405.103 8.47%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MONEY MARKET FUND PRIME SHARES CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
JANET W SHADLE 137531.43 10.68%
WELLS IRREVOCABLE GRANTOR TRUST
DTD 11-19-2003
17 HICKORY DR
LOCK HAVEN PA 17745
---------------------------------------------------------------- -------------------------- ---------------------------
RAYMOND JAMES & ASSOCIATES, INC. 81919.05 6.36%
880 CARILLON PARKWAY
ST PETERSBURG FL 33716
---------------------------------------------------------------- -------------------------- ---------------------------
PATRICK H RENNER 65201.37 5.06%
LEYLA K RENNER
JTWROS 3565 DUPLAIN ST N W
NORTH CANTON OH 44720
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MONEY MARKET FUND PRIME SHARES CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MORTON M YAMASAKI 182187.95 31.14%
CAROLYN H YAMASAKI
MORTON M YAMASAKI REVOC LVNG TR
DTD 1/30/01
PO BOX 1828
LIHUE HI 96766
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES Y S YEE 102494.28 17.52%
CHARLOTTE M YEE
JTWROS
975 ALA LEHUA ST
HONOLULU HI 96818-2303
---------------------------------------------------------------- -------------------------- ---------------------------
MARYANN MACKLIN 66110.19 11.30%
MACKLIN INC PENSION PLAN & TRUST
6089 SOUTH DEMENT RD
ROCHELLE IL 61068
---------------------------------------------------------------- -------------------------- ---------------------------
HARRY L GRUSS 31713.45 5.42%
ROLLOVER IRA
4 COTTAGE ST
EAST HARTFORD CT 06108
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MONEY MARKET FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 982438536.44 74.55%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 333593435.21 25.31%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MONEY MARKET FUND PRIME SHARES
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 132899045.247 41.27%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE MONEY MARKET FUND SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 7129549.95 80.87%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MG TRUST COMPANY CUST FBO 1130581.736 12.82%
SUPERIOR DERRICK SERVICES LLC
700 17TH STREET
SUITE 300
DENVER CO 80202
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 1649682.891 27.00%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 1073739.807 17.57%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 16382.765 38.41%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE FUND CLASS D
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 17429890.709 29.15%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 69.904 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 75.987 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE LEADERS FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 168006.126 27.94%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 81415.743 13.54%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 79275.677 13.19%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 32747.756 5.45%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 30112.689 5.01%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 30105.914 5.01%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE LEADERS FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 32590.076 38.55%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 27328.305 32.32%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 4471.546 5.29%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE LEADERS FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 178070.917 54.85%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 47089.366 14.51%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 32619.273 10.05%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE LEADERS FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 143751.45 43.91%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 103040.317 31.48%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 80445.642 24.58%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE LEADERS FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 5592.255 97.91%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE NATIONWIDE LEADERS FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 32453.943 100.00%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
THOMAS R HICKEY 2020.202 95.25%
SHARON STRITE
JTWROS
602 JEFFREY LN
WAYNE, PA 19087
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 100.693 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 100.693 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE INSTITUTIONAL
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 100722.861 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 100.703 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE INSTITUTIONAL
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 100.723 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 230981.951 57.02%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 21100.164 5.21%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 30230.359 35.79%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
J.J.B. HILLIARD, W.L. LYONS, INC. 8877.566 10.51%
501 S FOURTH AVE
LOUISVILLE KY 40202
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 7998.519 9.47%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 7368.701 8.72%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 411711.266 64.29%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 87768.531 13.70%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 39445.917 6.16%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE INSTITUTIONAL
CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 91.837 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 15087.286 99.24%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: AGGRESSIVE INSTITUTIONAL
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 115.615 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE
CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 355736.205 33.17%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
H&R BLOCK FINANCIAL ADVISORS, INC. 198212.3 18.48%
THE DIME BUILDING SUITE 1700
719 GRISWOLD STREET
DETROIT, MI 48226
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 92573.016 8.63%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 54083.69 5.04%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE
CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 126280.767 44.87%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 37225.725 13.23%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 26317.215 9.35%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE
CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1003657.429 72.59%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 87323.685 6.32%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE
INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 92.265 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE
CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 112.98 99.95%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATELY AGGRESSIVE
INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 114.17 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 350770.612 43.63%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
UBS FINANCIAL SERVICES INC. 77123.837 9.59%
1000 HARBOR BLVD
8TH FLOOR, COMPLIANCE DEPARTMENT
WEEHAWKEN, NJ 07086
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 56125.219 6.98%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 42485.163 5.28%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 110216.938 42.84%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 34492.171 13.41%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 27800.005 10.81%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1387496.461 71.79%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 187114.019 9.68%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE
INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 94.133 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 7830.365 98.59%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: MODERATE INSTITUTIONAL
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 113.057 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 1357275.913 55.99%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 305918.739 12.62%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 165784.474 6.84%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 260674.592 70.34%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 58621.639 15.82%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2754978.646 79.91%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY
INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 87.015 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 6738.819 98.36%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE OPTIMAL ALLOCATIONS FUND: SPECIALTY INSTITUTIONAL
SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 113.074 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
RELIANCE TRUST COMPANY 1970889.4 41.03%
OSSEO AREA SCHOOLS 403B
C/O FASCORP
8515 E ORCHARD RD 2T2
GREENWOOD VILLAGE CO 80111
---------------------------------------------------------------- -------------------------- ---------------------------
RELIANCE TRUST COMPANY CUSTODIAN 966620.953 20.12%
AVANADE INC. TNCIPP SUPPLEMENTAL
EXECUTIVE RETIREMENT AND SAVINGS PLAN
PO BOX 48529
ATLANTA GA 30362
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 791202.152 16.47%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 262190.272 40.91%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 71435.003 11.15%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 81265.228 46.92%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
ROBERT W. BAIRD & CO. INCORPORATED 38119.364 22.01%
777 EAST WISCONSIN AVE
MILWAUKEE WI 53202
---------------------------------------------------------------- -------------------------- ---------------------------
WEDBUSH MORGAN SECURITIES INC. 9848.538 5.69%
1000 WILSHIRE BLVD.
SUITE 900
LOS ANGELES CA 90017
---------------------------------------------------------------- -------------------------- ---------------------------
JEAN E OED 9820.687 5.67%
GEORGE H OED
JUDITH O SOBOTKA
JTWROS
415 RUSSELL AVE APT 112
GAITHERSBURG MD 20877
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 9531.916 5.50%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS MODERATE 51744626.433 21.97%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATELY AGGRESSIVE 44230772.782 18.78%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATE 38126420.235 16.19%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS MODERATELY AGGRESSIVE 32356662.145 13.74%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS AGGRESSIVE 31724372.754 13.47%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS AGGRESSIVE 16982673.729 7.21%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 82.44 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 7272284.99 97.33%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND LOCAL
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 11412.111 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE S&P 500 INDEX FUND SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 35683719.249 67.11%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 17483273.07 32.88%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SHORT DURATION BOND FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 67509.467 71.56%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
RONALD C ROBICHAUD 13186.52 13.98%
ROLLOVER IRA
6 BALDWIN ST
FRANKLIN NH 03235
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SHORT DURATION BOND FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
UBS FINANCIAL SERVICES INC. 2356.338 78.97%
1000 HARBOR BLVD
8TH FL, COMPLIANCE DEPARTMENT
WEEHAWKEN NJ 07086
---------------------------------------------------------------- -------------------------- ---------------------------
UBS FINANCIAL SERVICES INC. 521.165 17.47%
1000 HARBOR BLVD
8TH FL, COMPLIANCE DEPARTMENT
WEEHAWKEN NJ 07086
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SHORT DURATION BOND FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
COUNSEL TRUST CO CUSTODIAN FOR 88749.219 41.74%
CHARITON VALLEY MEDICAL CENTER 401K
235 ST CHARLES WAY STE 100
YORK PA 17402
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 87420.029 41.12%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL INVESTOR SERVICES CORP. 21571.913 10.15%
55 WATER STREET
NEW YORK NY 10041
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SHORT DURATION BOND FUND SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 4686162.003 70.92%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
COUNSEL TRUST FBO 548821.805 8.31%
THE CHIMES DC 403 B PLAN
336 4TH AVE STE 6
THE TIMES BUILDING
PITTSBURGH PA 15222-2004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SHORT DURATION BOND FUND IRA CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 300002.078 15.12%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 237339.586 11.96%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 214997.857 10.83%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 167622.849 8.45%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 166035.734 8.37%
ONE BEACON STREET
22ND FLOOR
BOSTON MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
A. G. EDWARDS & SONS, INC. 153642.378 7.74%
ONE NORTH JEFFERSON AVE.
SAINT LOUIS MO 63103
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 5979071.308 19.21%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
PRUDENTIAL INVESTMENT MANAGEMENT SRVCS 5756565.947 18.49%
3 GATEWAY CENTER
14TH FLOOR
NEWARK NJ 07102
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 4433274.351 14.24%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 2460822.175 7.90%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 2331367.902 7.49%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 158094.523 18.99%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 142837.96 17.16%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 111980.303 13.45%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 88811.496 10.67%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
MORGAN STANLEY DW INC. 51876.416 6.23%
2000 WESTCHESTER AVE LD
PURCHASE NY 10577
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 5075851.732 53.55%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 739477.043 7.80%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 657636.052 6.94%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
MORGAN KEEGAN & COMPANY, INC. 618412.089000001 6.52%
MORGAN KEEGAN TOWER 18TH FLOOR
50 FRONT STREET
MEMPHIS TN 38103
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 593996.629999999 6.27%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 1063833.694 50.92%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
CAREY & CO 332788.227 15.93%
7 EASTON OVAL EA4E70
COLUMBUS OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
WELLS FARGO BANK NA 204340.033 9.78%
ERIC R SEACREST
PO BOX 1533
MINNEAPOLIS MN 55480-1533
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 201215.582 91.94%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 401800.789 39.59%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 306609.661 30.21%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
HOLDON 173143.405 17.06%
C O SKY TRUST
P O BOX 419
FINDLAY OH 45839
---------------------------------------------------------------- -------------------------- ---------------------------
CHRISTIAN BROTHERS COMMUNITY 58637.799 5.78%
SUPPORT CHARITABLE TRUST
DTD 08/04/1988
PO BOX 29
ADAMSTOWN MD 21710
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP INDEX FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 6875232.332 68.27%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 2554161.762 25.36%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP INDEX FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 5771.691 14.71%
ONE BEACON STREET
22ND FLOOR
BOSTON, MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 3557.623 9.07%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
RAYMOND JAMES & ASSOCIATES, INC. 3552.274 9.05%
880 CARILLON PARKWAY
ST PETERSBURG FL 33716
---------------------------------------------------------------- -------------------------- ---------------------------
A. G. EDWARDS & SONS, 2688.14 6.85%
INC. ONE NORTH JEFFERSON AVE.
SAINT LOUIS MO 63103
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 2652.588 6.76%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
E*TRADE CLEARING LLC 2446.241 6.23%
135 E. 57TH STREET
NEW YORK NY 10022
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP INDEX FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 19723.988 43.71%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 19328.108 42.83%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
RAYMOND JAMES & ASSOCIATES, INC. 2428.179 5.38%
880 CARILLON PARKWAY
ST PETERSBURG FL 33716
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP INDEX FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS MODERATE 9954845.003 22.97%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS MODERATELY AGGRESSIVE 7547154.816 17.41%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS AGGRESSIVE 7387217.061 17.04%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATE 6011849.355 13.87%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
INVESTOR DESTINATIONS MODERATELY AGGRESSIVE 5952417.558 13.73%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GVIT INVESTOR DESTINATIONS AGGRESSIVE 5724314.916 13.21%
3435 STELZER RD
C/O BISYS FUND SERV
COLUMBUS, OH 43219
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP LEADERS FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 714336.733 44.45%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 362171.516 22.54%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 219120.735 13.64%
ONE BEACON STREET
22ND FLOOR
BOSTON, MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 129825.837 8.08%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP LEADERS FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 132539.627 80.61%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 18829.466 11.45%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP LEADERS FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 804019.719 67.49%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
A. G. EDWARDS & SONS, 74828.284 6.28%
INC. ONE NORTH JEFFERSON AVE.
SAINT LOUIS MO
63103
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 64893.356 5.45%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP LEADERS FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 443420.625 99.79%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP LEADERS FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MG TRUST COMPANY CUST FBO 419.253 79.08%
SUPERIOR DERRICK SERVICES LLC
700 17TH STREET
SUITE 300
DENVER CO 80202
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 110.894 20.92%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE SMALL CAP LEADERS FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 11296.249 85.01%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
CAMCO 1880.379 14.15%
80 WEST STREET STE 201
RUTLAND VT 05701
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE TAX-FREE INCOME FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
DOUGLAS J LLEWELLYN 23369.674 32.88%
TOD
43 PUTTING GREEN LN
PENFIELD NY 14526-2548
---------------------------------------------------------------- -------------------------- ---------------------------
LEOLA KISTLER 8997.657 12.66%
TOD
1040 WOODSIDE DR
FINDLAY OH 45840
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 8542.216 12.02%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
SHIRLEY J AUCK 8109.141 11.41%
TOD
7307 STATE ROUTE 96
CRESTLINE OH 44827-9223
---------------------------------------------------------------- -------------------------- ---------------------------
JUDITH A KOVACS 5119.518 7.20%
TOD
115 FELDSPAR DR
SYRACUSE NY 13219
---------------------------------------------------------------- -------------------------- ---------------------------
JOSEPH H BLASS 4306.988 6.06%
315 S HICKORY ST APT #209
MOUNT CARMEL PA 17851
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE TAX-FREE INCOME FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 80907.538 68.86%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 19987.118 17.01%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NANCY ANN MCALEXANDER 8751.688 7.45%
TOD
614 BARBARA DR
TIPP CITY OH 45371
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE TAX-FREE INCOME FUND CLASS X
---------------------------------------------------------------- -------------------------- ---------------------------
GARY R PLOSKINA 44492.849 15.37%
TOD
2634 5TH AVE
MC KEESPORT PA 15132-1137
---------------------------------------------------------------- -------------------------- ---------------------------
ELSIE S ADKINS 31922.667 11.03%
TOD
PO BOX 30966
GREENVILLE NC 27833-0966
---------------------------------------------------------------- -------------------------- ---------------------------
CYNTHIA A MOYER 16443.453 5.68%
DEBORAH L COHEN
JTWROS 1341 FOXWOOD DR
MONROEVILLE PA 15146
---------------------------------------------------------------- -------------------------- ---------------------------
AMELIA H CORNS 15058.474 5.20%
SHIRLEY A MOONIS
JTWROS
BOX 192
SLICKVILLE PA 15684
---------------------------------------------------------------- -------------------------- ---------------------------
MERLE SCHRADER 14705.68 5.08%
TOD
11755 RT 47 EAST
WEST MANSFIELD OH 43358
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE TAX-FREE INCOME FUND CLASS Y
---------------------------------------------------------------- -------------------------- ---------------------------
POLLY A HOPKINS 3403.975 27.32%
TOD
4405 SYCAMORE DR
HAMPSTEAD MD 21074-2311
---------------------------------------------------------------- -------------------------- ---------------------------
YOLANDA S RHODES 3293.332 26.43%
PO BOX 1375
BELLE GLADE FL
334306375
---------------------------------------------------------------- -------------------------- ---------------------------
E JANE MOFFITT 2710.456 21.75%
DONALD E MOFFITT
JTWROS TOD
2200 ROAD 7
WEST LIBERTY OH 43357
---------------------------------------------------------------- -------------------------- ---------------------------
JAMES C FUQUA 1049.468 8.42%
FRANCES FUQUA
JAMES AND FRANCES FUQUA LIVING TRUST
DTD 02/11/2000
7608 SUE ELLAN DR
PORT RICHEY FL 34668
---------------------------------------------------------------- -------------------------- ---------------------------
EDNA A SCHREINER TOD 893.074 7.17%
GARY G EISENHART
DEE ANN RUFFING
14180 E TWP RD 136
BELLEVUE OH 44811
---------------------------------------------------------------- -------------------------- ---------------------------
BONNIE MCGALLIARD 704.761 5.66%
WILLIAM MCGALLIARD
JTWROS TOD
625 CREAMERY RD
TELFORD PA 18969
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE U.S. GROWTH LEADERS FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2648810.149 34.60%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIDELITY INSTITUTIONAL OPERATIONS 1040066.788 13.59%
CO INC AS AGENT FOR CERTAIN
EMPLOYEE BENEFIT PLANS
C/O DAVE STALEY
100 MAGELLAN WAY KW1C
COVINGTON KY 41015
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 628863.184 8.21%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 586496.808 7.66%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
LINSCO/PRIVATE LEDGER CORP. 538408.892 7.03%
ONE BEACON STREET
22ND FLOOR
BOSTON, MA 02108
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 513451.294 6.71%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE U.S. GROWTH LEADERS FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 272434.728 44.05%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 74251.64 12.01%
SEED ACCOUNT
ATTN MIKE POLICARPO
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
E*TRADE CLEARING LLC 60216.737 9.74%
135 E. 57TH STREET
NEW YORK NY 10022
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 50927.41 8.24%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE U.S. GROWTH LEADERS FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2189222.163 68.98%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 206782.661 6.52%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE U.S. GROWTH LEADERS FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 161022.207 47.69%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 108166.837 32.03%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 68475.912 20.28%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE U.S. GROWTH LEADERS FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 138230.631 99.90%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE U.S. GROWTH LEADERS FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 73998.955 100.00%
SEED ACCOUNT
ATTN MIKE POLICARPO
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE US GROWTH LEADERS LONG-SHORT FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 2391635.459 59.98%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 222719.303 5.59%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE US GROWTH LEADERS LONG-SHORT FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 86341.416 79.10%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 12342.458 11.31%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE US GROWTH LEADERS LONG-SHORT FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 3492368.807 79.50%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
CITIGROUP GLOBAL MARKETS INC. 244021.174 5.55%
333 WEST 34TH STREET, 7TH FLOOR
NEW YORK NY 10001
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE US GROWTH LEADERS LONG-SHORT FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM SPECIALTY 852175.016 62.32%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATELY AGGRESSIVE 218628.66 15.99%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM MODERATE 199162.88 14.56%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE AM AGGRESSIVE 91753.431 6.71%
ASSET ALLOCATION FUND
3435 STELZER RD
C/O MIKE LEONARD
COLUMBUS OH 43219-6004
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE US GROWTH LEADERS LONG-SHORT FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 112.875 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE VALUE OPPORTUNITIES FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 234087.815 25.55%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 195132.49 21.30%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONWIDE INVESTMENT SERVICES CORP. 63861.322 6.97%
C/O PORTFOLIO ACCOUNTING
ONE NATIONWIDE PLAZA
COLUMBUS, OH 43215
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE VALUE OPPORTUNITIES FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 32189.088 16.60%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 13968.297 7.20%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE VALUE OPPORTUNITIES FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 27830.081 47.39%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 12805.481 21.81%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE VALUE OPPORTUNITIES FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 97.713 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE VALUE OPPORTUNITIES FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 103.509 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE WORLDWIDE LEADERS FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
CHARLES SCHWAB & CO., INC. 706415.579 19.92%
101 MONTGOMERY STREET
MS:SF101MONT-22-241
SAN FRANCISCO CA 94104
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 318872.723 8.99%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 294181.699 8.30%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE WORLDWIDE LEADERS FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 28431.88 36.40%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
A. G. EDWARDS & SONS, 20982.097 26.86%
INC. ONE NORTH JEFFERSON AVE.
SAINT LOUIS MO 63103
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 6492.782 8.31%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
RAYMOND JAMES & ASSOCIATES, INC. 6482.98 8.30%
880 CARILLON PARKWAY
ST PETERSBURG FL 33716
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE WORLDWIDE LEADERS FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 307479.473 49.16%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST
3RD FLOOR
JACKSONVILLE FL 32246
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL FINANCIAL SERVICES LLC 178507.458 28.54%
200 LIBERTY STREET
ONE WORLD FINANCIAL CENTER 5TH FLR
NEW YORK NY 10281-1003
---------------------------------------------------------------- -------------------------- ---------------------------
PERSHING LLC 39069.661 6.25%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
---------------------------------------------------------------- -------------------------- ---------------------------
FIRST CLEARING, LLC 38746.58 6.19%
10750 WHEAT FIRST DRIVE
GLEN ALLEN VA 23060
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE WORLDWIDE LEADERS FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 139.989 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE WORLDWIDE LEADERS FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 153.831 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
GARTMORE WORLDWIDE LEADERS FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 1729.566 68.30%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
STERNE, AGEE & LEACH, INC. 802.568 31.70%
813 SHADES CREEK PARKWAY
SUITE 100B
BIRMINGHAM AL 35209
---------------------------------------------------------------- -------------------------- ---------------------------
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NORTHPOINTE SMALL CAP GROWTH FUND CLASS A
---------------------------------------------------------------- -------------------------- ---------------------------
LARRY D WILLS 1450.84 91.24%
SUSAN M WILLS
JTWOS
1711 BALSLEY RD
STAUNTON, VA 24401-6637
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 118.388 7.45%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
NORTHPOINTE SMALL CAP GROWTH FUND CLASS B
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 118.639 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
NORTHPOINTE SMALL CAP GROWTH FUND CLASS C
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 118.639 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
NORTHPOINTE SMALL CAP GROWTH FUND INSTITUTIONAL CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 4032176.992 71.39%
SEED ACCOUNT
ATTN MIKE POLICARPO
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
MSL COMPANY 415739.601 7.36%
2430 W INDIAN TRAIL SUITE 201
C/O GREATBANC TRUST COMPANY
AURORA IL 60506
---------------------------------------------------------------- -------------------------- ---------------------------
HOLLOWWAVE & CO 354977.8 6.29%
PO BOX 5496
BOSTON MA 02206-5496
---------------------------------------------------------------- -------------------------- ---------------------------
JUPITER AND CO 287584.838 5.09%
PO BOX 9130
C/O INVESTORS BANK AND TRUST CO
BOSTON MA 02117-9130
---------------------------------------------------------------- -------------------------- ---------------------------
NORTHPOINTE SMALL CAP GROWTH FUND CLASS R
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 118.484 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
|
---------------------------------------------------------------- -------------------------- ---------------------------
NUMBER OF SHARES PERCENT OF THE CLASS HELD
NAME AND ADDRESS OF SHAREHOLDER BENEFICIALLY OWNED BY THE SHAREHOLDER
---------------------------------------------------------------- -------------------------- ---------------------------
NORTHPOINTE SMALL CAP GROWTH FUND INSTITUTIONAL SERVICE CLASS
---------------------------------------------------------------- -------------------------- ---------------------------
NWD INVESTMENTS 118.286 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
---------------------------------------------------------------- -------------------------- ---------------------------
NORTHPOINTE SMALL CAP VALUE FUND
---------------------------------------------------------------- -------------------------- ---------------------------
HUDSON- WEBBER FOUNDATION 854392.773 27.48%
ATTN LESLIE MALCOLMSON
333 W FORT ST STE 1310
DETROIT MI 48226
---------------------------------------------------------------- -------------------------- ---------------------------
CAPINCO 386250.663 12.43%
PO BOX 1787
C/O US BANK
MILWAUKEE WI 53201
---------------------------------------------------------------- -------------------------- ---------------------------
STRAFE & CO 332937.014 10.71%
PARK TUDOR TR
PO BOX 160
A/C 2820727510
WESTERVILLE OH 43086
---------------------------------------------------------------- -------------------------- ---------------------------
GARRETT EVANGELICAL THEOLOGICAL SEMINARY 327803.125 10.54%
2121 SHERIDAN RD
EVANSTON IL 60201
---------------------------------------------------------------- -------------------------- ---------------------------
US BANK TTEE 231356.421 7.44%
NEW CENTURY ALTERNATIVE STRAT PORT
PO BOX 1787
MILWAUKEE WI 53201-1787
---------------------------------------------------------------- -------------------------- ---------------------------
E*TRADE CLEARING LLC 199795.607 6.43%
135 E. 57TH STREET
NEW YORK NY 10022
---------------------------------------------------------------- -------------------------- ---------------------------
COMERICA BANK 191397.218 6.16%
JACKSON COUNTY COMMUNITY FOUNDATION
411 W LAFAYETTE MC 3446
DETROIT MI 48275-3446
---------------------------------------------------------------- -------------------------- ---------------------------
NATIONAL CITY BANK 166544.118 5.36%
SUSAN K FLETCHER AGY
PO BOX 94984
ATTN MF 01-40E900002
CLEVELAND OH 44101-4984
---------------------------------------------------------------- -------------------------- ---------------------------
|
To the extent Nationwide Life Insurance Company and its affiliates directly or indirectly owned, controlled and held power to vote 25% or more of the outstanding shares of the Funds listed above, it is deemed to have "control" over matters which are subject a vote of the Fund's shares.
Nationwide Life Insurance Company, One Nationwide Plaza, Columbus, Ohio 43215 is wholly-owned by Nationwide Financial Services, Inc. (NFS). NFS, a holding company, has two classes of common stock outstanding with different voting rights enabling Nationwide Corporation (the holder of all outstanding Class B Common Stock) to control NFS. Nationwide Corporation is also a holding company in the Nationwide Insurance Enterprise. All of the Common Stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders. For funds that have not yet commenced operations as of the date of this SAI, it is expected that upon commencement of the public offering, NWD or one of its affiliates will own all or substantially all of the new fund's shares, but that shortly thereafter, such ownership will decrease as sales are made to the public.
FINANCIAL STATEMENTS
The Report of Independent Registered Public Accounting Firm and Financial Statements for the Trust for the fiscal year ended October 31, 2006 in the Trust's Annual Report are incorporated herein by reference. Copies of the Trust's Annual Reports and Semi-Annual Reports are available without charge upon request by writing the Trust or by calling toll free 800-848-0920.
APPENDIX A
DEBT RATINGS
STANDARD & POOR'S DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting.
INVESTMENT GRADE
AAA - Debt rated `AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA - Debt rated `AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only
in small degree.
A - Debt rated `A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB- Debt rated `BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
|
SPECULATIVE GRADE
Debt rated `BB', `B', `CCC', `CC' and `C' is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. `BB' indicates the least degree of speculation and `C' the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB - Debt rated `BB' is less vulnerable to default than other
speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments.
187
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B - Debt rated `B' has a greater vulnerability to default than
obligations rated BB but currently has the capacity to meet
interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal.
CCC - Debt rated `CCC' is currently vulnerable to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
CC - Debt rated `CC' typically is currently highly vulnerable to
nonpayment.
C - Debt rated `C' signifies that a bankruptcy petition has been
filed, but debt service payments are continued.
D - Debt rated `D' is in payment default. The `D' rating category
is used when interest payments or principal payments are not
made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such
payments will be made during such grade period. The `D' rating
also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized. .
|
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of
such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat
larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
188
|
Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
|
STATE AND MUNICIPAL NOTES
Excerpts from Moody's Investors Service, Inc., description of state and municipal note ratings:
MIG-1- Notes bearing this designation are of the best quality, enjoying strong protection from established cash flows of funds for their servicing from established and board-based access to the market for refinancing, or both.
MIG-2- Notes bearing this designation are of high quality, with margins of protection ample although not so large as in the preceding group.
MIG-3- Notes bearing this designation are of favorable quality, with all security elements accounted for but lacking the strength of the preceding grade. Market access for refinancing, in particular, is likely to be less well established.
FITCH, INC. BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered investment grade and representing the lowest
expectation of credit risk. The obligor has an exceptionally
strong capacity for timely payment of financial commitments, a
capacity that is highly unlikely to be adversely affected by
foreseeable events.
189
|
AA Bonds considered to be investment grade and of very high credit
quality. This rating indicates a very strong capacity for timely
payment of financial commitments, a capacity that is not
significantly vulnerable to foreseeable events.
A Bonds considered to be investment grade and represent a low
expectation of credit risk. This rating indicates a strong
capacity for timely payment of financial commitments. This
capacity may, nevertheless, be more vulnerable to changes in
economic conditions or circumstances than long term debt with
higher ratings.
BBB Bonds considered to be in the lowest investment grade and
indicates that there is currently low expectation of credit risk.
The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in economic conditions
and circumstances are more likely to impair this capacity.
BB Bonds are considered speculative. This rating indicates that
there is a possibility of credit risk developing, particularly as
the result of adverse economic changes over time; however,
business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this
category are not investment grade.
B Bonds are considered highly speculative. This rating indicates
that significant credit risk is present, but a limited margin of
safety remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.
CCC, CC Bonds are considered a high default risk. Default is a real
and C possibility. Capacity for meeting financial commitments is solely
reliant upon sustained, favorable business or economic
developments. A `CC' rating indicates that default of some kind
appears probable. `C' rating signal imminent default.
DDD, DD Bonds are in default. Such bonds are not meeting current
and D obligations and are extremely speculative. `DDD' designates the
highest potential for recovery of amounts outstanding on any
securities involved and `D' represents the lowest potential for
recovery.
|
SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from `A-1' for the highest quality obligations to `D' for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated `A-1'.
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Issues rated `B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.
190
|
D Debt rated `D' is in payment default. the `D' rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grade period.
|
STANDARD & POOR'S NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating.
The following criteria will be used in making the assessment:
1. Amortization schedule - the larger the final maturity relative to other maturities, the more likely the issue is to be treated as a note.
2. Source of payment - the more the issue depends on the market for its refinancing, the more likely it is to be considered a note.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong capacity to pay principal and interest are given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term
of the notes.
SP-3 Speculative capacity to pay principal and interest.
|
MOODY'S SHORT-TERM RATINGS
Moody's short-term debt ratings are opinions on the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior capacity for repayment of senior short-term debt obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: (I) leading market positions in well established industries, (II) high rates of return on funds employed, (III) conservative capitalization structures with moderate reliance on debt and ample asset protection, (IV) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (V) well established access to a range of financial markets and assured sources of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the prime rating categories.
MOODY'S NOTE RATINGS
MIG VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
SG This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
|
FITCH'S SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+ Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
APPENDIX B - PROXY VOTING GUIDELINES SUMMARIES
GARTMORE MUTUAL FUND CAPITAL TRUST, GARTMORE SA CAPITAL TRUST, GARTMORE MORLEY CAPITAL MANAGEMENT, INC., AND NORTHPOINTE CAPITAL, LLC
GENERAL
The Board of Trustees of the Funds has approved the continued delegation of the authority to vote proxies relating to the securities held in the portfolios of the Funds to each Fund's investment adviser or sub-adviser, as the case may be, after the Board reviewed and considered the proxy voting policies and procedures used by each of the investment advisers and sub-advisers of the Funds, some of which advisers and sub-advisers use an independent service provider, as described below.
Each of Gartmore Mutual Fund Capital Trust, Gartmore SA Capital Trust, Morley Capital Management, Inc., and NorthPointe Capital, LLC (hereinafter referred to collectively as "NWD"), is an investment adviser that is registered with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act"). NWD provides investment advisory services to various types of clients, including registered and unregistered investment companies, collective trusts, institutional separate accounts, insurance general accounts, charitable endowments, Taft-Hartley Act plans, ERISA plans, state-sponsored funds, managed separate accounts, and individuals (hereinafter referred to collectively as the "Clients").
Voting proxies that are received in connection with underlying portfolio securities held by Clients is an important element of the portfolio management services that NWD performs for Clients. NWD's goal in performing this service is to make proxy voting decisions: (i) to vote or not to vote proxies in a manner that serves the best economic interests of advisory clients; and (ii) that avoid the influence of conflicts of interest. To implement this goal, NWD has adopted proxy voting guidelines (the "NWD Proxy Voting Guidelines") to assist NWD in making proxy voting decisions and in developing procedures for effecting those decisions. The NWD Proxy Voting Guidelines are designed to ensure that where NWD has the authority to vote proxies, all legal, fiduciary, and contractual obligations will be met.
The NWD Proxy Voting Policies address a wide variety of individual topics, including, among other matters, shareholder voting rights, anti-takeover defenses, board structures and the election of directors, executive and director compensation, reorganizations, mergers, and various shareholder proposals.
The proxy voting records of the Funds are available to shareholders on the Trust's website, nwdfunds.com, and the SEC's website beginning September, 2004.
HOW PROXIES ARE VOTED
NWD has delegated to Institutional Shareholder Services ("ISS"), an independent service provider, the administration of proxy voting for Client portfolio securities directly managed by NWD. ISS, a Delaware corporation, provides proxy-voting services to many asset managers on a global basis. A committee of Gartmore personnel has reviewed, and will continue to review annually, NWD's relationship with ISS and the quality and effectiveness of the various services provided by ISS.
Specifically, ISS assists NWD in the proxy voting and corporate governance oversight process by developing and updating the "ISS Proxy Voting Guidelines," which are incorporated into the NWD Proxy Voting Guidelines, and by providing research and analysis, recommendations regarding votes, operational implementation, and recordkeeping and reporting services. NWD's decision to retain ISS is based principally on the view that the services that ISS provides, subject to oversight by NWD, generally will result in proxy voting decisions which serve the best economic interests of Clients. NWD has reviewed, analyzed, and determined that the ISS Proxy Voting Guidelines are consistent with the views of NWD on the various types of proxy proposals. When the ISS Proxy Voting Guidelines do not cover a specific proxy issue and ISS does not provide a recommendation: (i) ISS will notify NWD; and (ii) NWD will use its best judgment in voting proxies on behalf of the Clients. A summary of the ISS Proxy Voting Guidelines is set forth below.
CONFLICTS OF INTEREST
NWD and NWD's subsidiaries do not engage in investment banking, administration or management of corporate retirement plans, or any other activity that is likely to create a potential conflict of interest. In addition, because Client proxies are voted by ISS pursuant to the pre-determined ISS Proxy Voting Guidelines, NWD generally does not make an actual determination of how to vote a particular proxy, and, therefore, proxies voted on behalf of the Clients do not reflect any conflict of interest. Nevertheless, the NWD Proxy Voting Guidelines address the possibility of such a conflict of interest arising.
The NWD Proxy Voting Guidelines provide that, if a proxy proposal were to create a conflict of interest between the interests of a Client and those of NWD (or between a Client and those of any of NWD's affiliates, including Gartmore Distribution Services, Inc., and Nationwide), then the proxy should be voted strictly in conformity with the recommendation of ISS. To monitor compliance with this policy, any proposed or actual deviation from a recommendation of ISS must be reported to the chief counsel for Gartmore. The chief counsel for Gartmore then will provide guidance concerning the proposed deviation and whether a deviation presents any potential conflict of interest. If Gartmore then casts a proxy vote that deviates from an ISS recommendation, the affected Client (or other appropriate Client authority) will be given a report of this deviation.
CIRCUMSTANCES UNDER WHICH PROXIES WILL NOT BE VOTED
Gartmore, through ISS, shall attempt to process every vote for all domestic and foreign proxies that Gartmore receives; however, there may be cases in which Gartmore will not process a proxy because it is impractical or too expensive to do so. For example, Gartmore will not process a proxy in connection with a foreign security if the cost of voting A FOREIGN PROXY outweighs the benefit of voting the foreign proxy, when Gartmore has not been given enough time to process the vote, or when a sell order for the foreign security is outstanding and proxy voting would impede the sale of the foreign security. Also, Gartmore generally will not seek to recall the securities on loan for the purpose of voting the securities.
DELEGATION OF PROXY VOTING TO SUB-ADVISERS TO FUNDS
For any Fund, or portion of a Fund that is directly managed by a sub-adviser (other than Gartmore), the Trustees of the Fund and Gartmore have delegated proxy voting authority to that sub-adviser. Each sub-adviser has provided its proxy voting policies to the Board of Trustees of the Fund and Gartmore for their respective review and these proxy voting policies are described below. Each sub-adviser is required (1) to represent quarterly to Gartmore that all proxies of the Fund(s) advised by these sub-adviser were voted in accordance with the sub-adviser's proxy voting policies as provided to Gartmore and (2) to confirm that there have been no material changes to the sub-adviser's proxy voting policies.
2005 ISS PROXY VOTING GUIDELINES SUMMARY
The following is a concise summary of the ISS proxy voting policy guidelines for 2005.
1. AUDITORS
Vote CASE-BY-CASE on shareholder proposals on auditor rotation, taking into account these factors:
o Tenure of the audit firm
o Establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for both audit quality and competitive price
o Length of the rotation period advocated in the proposal
o Significant audit-related issues
o Number of audit committee meetings held each year
o Number of financial experts serving on the committee
2. BOARD OF DIRECTORS
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Generally, vote CASE-BY-CASE. But WITHHOLD votes from:
o Insiders and affiliated outsiders on boards that are not at least majority independent
o Directors who sit on more than six boards, or on more than two public boards in addition to their own if they are CEOs of public companies
o Directors who adopt a poison pill without shareholder approval since the company's last annual meeting and there is no requirement to put the pill to shareholder vote within 12 months of its adoption??
o Directors who serve on the compensation committee when there is a negative correlation between chief executive pay and company performance (fiscal year end basis)
o Directors who have failed to address the issue(s) that resulted in any of the directors receiving more than 50% withhold votes out of those cast at the previous board election
CLASSIFICATION/DECLASSIFICATION OF THE BOARD
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors
annually.
INDEPENDENT CHAIRMAN (SEPARATE CHAIRMAN/CEO)
Vote FOR shareholder proposals asking that the chairman and CEO positions be separated (independent chairman), unless the company has a strong countervailing governance structure, including a lead director, two-thirds independent board, all independent key committees, and established governance guidelines. Additionally, the company should not have underperformed its peers.
MAJORITY OF INDEPENDENT DIRECTORS/ESTABLISHMENT OF COMMITTEES
Vote FOR shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the ISS definition of independence.
OPEN ACCESS (SHAREHOLDER RESOLUTION)
Vote CASE-BY-CASE basis, taking into account the ownership threshold proposed in
the resolution and the proponent's rationale.
3. SHAREHOLDER RIGHTS
SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written consent.
SHAREHOLDER ABILITY TO CALL SPECIAL MEETINGS
Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.
SUPERMAJORITY VOTE REQUIREMENTS
Vote AGAINST proposals to require a supermajority shareholder vote.
Vote FOR proposals to lower supermajority vote requirements.
CUMULATIVE VOTING
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company's other governance provisions.
CONFIDENTIAL VOTING
Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election. In proxy contests, support confidential voting proposals only if dissidents agree to the same policy that applies to management.
4. PROXY CONTESTS
VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis, considering the factors that include the long-term financial performance, management's track record, qualifications of director nominees (both slates), and an evaluation of what each side is offering shareholders.
REIMBURSING PROXY SOLICITATION EXPENSES
Vote CASE-BY-CASE. Where ISS recommends in favor of the dissidents, we also recommend voting for reimbursing proxy solicitation expenses.
5. Poison Pills
Vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals to redeem a company's poison pill and management proposals to ratify a poison pill.
6. MERGERS AND CORPORATE RESTRUCTURINGS
Vote CASE-BY-CASE on mergers and corporate restructurings based on such features as the fairness opinion, pricing, strategic rationale, and the negotiating process.
7. REINCORPORATION PROPOSALS
Proposals to change a company's state of incorporation should be evaluated on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, and a comparison of the jurisdictional laws. Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes.
8. CAPITAL STRUCTURE
Common Stock Authorization
Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis using a model developed by ISS.
Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain.
DUAL-CLASS STOCK
Vote AGAINST proposals to create a new class of common stock with superior voting rights. Vote FOR proposals to create a new class of nonvoting or subvoting common stock if:
o It is intended for financing purposes with minimal or no dilution to current shareholders
o It is not designed to preserve the voting power of an insider or significant shareholder
9. EXECUTIVE AND DIRECTOR COMPENSATION
ISS applies a quantitative methodology, but for Russell 3000 companies will also apply a pay-for-performance overlay in assessing equity-based compensation plans.
Vote AGAINST a plan if the cost exceeds the allowable cap.
Vote FOR a plan if the cost is reasonable (below the cap) unless any of the following conditions apply:
o The plan expressly permits repricing of underwater options without shareholder approval; or
o There is a disconnect between the CEO's pay and performance (an increase in pay and a decrease in performance), the main source for the pay increase is equity-based, and the CEO participates in the plan being voted on
o The company's most recent three-year burn rate is excessive and is an outlier within its peer group
A company that has triggered the burn rate policy may avoid an AGAINST vote recommendation, if it commits to meet the industry average burn rate over the next three years. The above general voting guidelines for pay for performance may change if the compensation committee members can demonstrate improved performance in an additional public filing such as a DEFA 14A or 8K. To demonstrate improved performance, committee members should review all components of a CEO's compensation and prepare a tally sheet with dollar amounts under various payout scenarios. The committee should also have the sole authority to hire and fire outside compensation consultants.
DIRECTOR COMPENSATION
Before recommending a vote FOR a director equity plan, ISS will review the company's proxy statement for the following qualitative features:
o Stock ownership guidelines (a minimum of three times the annual cash retainer)
o Vesting schedule or mandatory holding/deferral period (minimum vesting of three years for stock options or restricted stock)
o Balanced mix between cash and equity
o Non-employee directors should not receive retirement benefits/perquisites
o Detailed disclosure of cash and equity compensation for each director
MANAGEMENT PROPOSALS SEEKING APPROVAL TO REPRICE OPTIONS
Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following:
o Historic trading patterns
o Rationale for the repricing
o Value-for-value exchange
o Option vesting
o Term of the option
o Exercise price
o Participation
o reatment of surrendered options
QUALIFIED EMPLOYEE STOCK PURCHASE PLANS
Vote on qualified employee stock purchase plans on a CASE-BY-CASE basis.
Vote FOR qualified employee stock purchase plans where all of the following apply:
o Purchase price is at least 85 percent of fair market value
o Offering period is 27 months or less, and
o Potential voting power dilution (VPD) is 10 percent or less.
Vote AGAINST qualified employee stock purchase plans where any of the opposite conditions occur.
NONQUALIFIED EMPLOYEE STOCK PURCHASE PLANS
Vote on nonqualified employee stock purchase plans on a CASE-BY-CASE basis.
Vote FOR nonqualified plans with all the following features:
o Broad-based participation
o Limits on employee contribution (a fixed dollar amount or a percentage of base salary)
o Company matching contribution up to 25 percent of employee's contribution, which is effectively a discount of 20 percent from market value
o No discount on the stock price on the date of purchase since there is a company matching contribution Vote AGAINST nonqualified employee stock purchase plans if they do not meet the above criteria.
SHAREHOLDER PROPOSALS ON COMPENSATION
Generally vote CASE-BY-CASE, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. But generally vote FOR shareholder proposals that:
o Advocate the use of performance-based awards like indexed, premium-priced, and performance-vested options or performance-based shares, unless the proposal is overly restrictive or the company already substantially uses such awards.
o Call for a shareholder vote on extraordinary benefits contained in Supplemental Executive Retirement Plans (SERPs).
10. SOCIAL AND ENVIRONMENTAL ISSUES
THESE ISSUES COVER A WIDE RANGE OF TOPICS, INCLUDING CONSUMER AND PUBLIC SAFETY, ENVIRONMENT AND ENERGY, GENERAL CORPORATE ISSUES, LABOR STANDARDS AND HUMAN RIGHTS, MILITARY BUSINESS, AND WORKPLACE DIVERSITY.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.
Vote:
o FOR proposals for the company to amend its Equal Employment Opportunity
(EEO) Statement to include reference to sexual orientation, unless the
change would result in excessive costs for the company.
o AGAINST resolutions asking for the adopting of voluntary labeling of ingredients or asking for companies to label until a phase out of such ingredients has been completed.
o CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, with consideration of the risks associated with certain international markets, the utility of such a report to shareholders, and the existence of a publicly available code of corporate conduct that applies to international operations
BLACKROCK ADVISORS, LLC (BLACKROCK INVESTMENT MANAGEMENT, LLC)
PROXY VOTING POLICIES AND PROCEDURES
These Proxy Voting Policies and Procedures ("Policy") for BlackRock Advisors, LLC and its affiliated U.S. registered investment advisers(1) ("BlackRock") reflect our duty as a fiduciary under the Investment Advisers Act of 1940 (the "Advisers Act") to vote proxies in the best interests of our clients. BlackRock serves as the investment manager for investment companies, other commingled investment vehicles and/or separate accounts of institutional and other clients. The right to vote proxies for securities held in such accounts belongs to BlackRock's clients. Certain clients of BlackRock have retained the right to vote such proxies in general or in specific circumstances.(2) Other clients, however, have delegated to BlackRock the right to vote proxies for securities held in their accounts as part of BlackRock's authority to manage, acquire and dispose of account assets.
When BlackRock votes proxies for a client that has delegated to BlackRock proxy voting authority, BlackRock acts as the client's agent. Under the Advisers Act, an investment adviser is a fiduciary that owes each of its clients a duty of care and loyalty with respect to all services the adviser undertakes on the client's behalf, including proxy voting. BlackRock is therefore subject to a fiduciary duty to vote proxies in a manner BlackRock believes is consistent with the client's best interests,(3) whether or not the client's proxy voting is subject to the fiduciary standards of the Employee Retirement Income Security Act of 1974 ("ERISA").(4) When voting proxies for client accounts (including investment companies), BlackRock's primary objective is to make voting decisions solely in the best interests of clients and ERISA clients' plan beneficiaries and participants. In fulfilling its obligations to clients, BlackRock will seek to act in a manner that it believes is most likely to enhance the economic value of the underlying securities held in client accounts.(5) It is imperative that BlackRock considers the interests of its clients, and not the interests of BlackRock, when voting proxies and that real (or perceived) material conflicts that may arise between BlackRock's interest and those of BlackRock's clients are properly addressed and resolved.
(1) The Policy does not apply to BlackRock Asset Management U.K. Limited and BlackRock Investment Managers International Limited, which are U.S. registered investment advisers based in the United Kingdom.
(2) In certain situations, a client may direct BlackRock to vote in accordance with the client's proxy voting policies. In these situations, BlackRock will seek to comply with such policies to the extent it would not be inconsistent with other BlackRock legal responsibilities.
(3) Letter from Harvey L. Pitt, Chairman, SEC, to John P.M. Higgins, President, Ram Trust Services (February 12, 2002) (Section 206 of the Investment Advisers Act imposes a fiduciary responsibility to vote proxies fairly and in the best interests of clients); SEC Release No. IA-2106 (February 3, 2003).
(4) DOL Interpretative Bulletin of Sections 402, 403 and 404 of ERISA at 29 C.F.R. 2509.94-2
(5) Other considerations, such as social, labor, environmental or other policies, may be of interest to particular clients. While BlackRock is cognizant of the importance of such considerations, when voting proxies it will generally take such matters into account only to the extent that they have a direct bearing on the economic value of the underlying securities. To the extent that a BlackRock client desires to pursue a particular social, labor, environmental or other agenda through the proxy votes made for its securities held through BlackRock as investment adviser, BlackRock encourages the client to consider retaining direct proxy voting authority or to appoint independently a special proxy voting fiduciary other than BlackRock.
Advisers Act Rule 206(4)-6 was adopted by the SEC in 2003 and requires, among other things, that an investment adviser that exercises voting authority over clients' proxy voting adopt policies and procedures reasonably designed to ensure that the adviser votes proxies in the best interests of clients, discloses to its clients information about those policies and procedures and also discloses to clients how they may obtain information on how the adviser has voted their proxies.
In light of such fiduciary duties, the requirements of Rule 206(4)-6, and given the complexity of the issues that may be raised in connection with proxy votes, BlackRock has adopted these policies and procedures. BlackRock's Equity Investment Policy Oversight Committee, or a sub-committee thereof (the "Committee"), addresses proxy voting issues on behalf of BlackRock and its clients.(6) The Committee is comprised of senior members of BlackRock's Portfolio Management Group and advised by BlackRock's Legal and Compliance Department.
(6) Subject to the Proxy Voting Policies of Merrill Lynch Bank & Trust Company FSB, the Committee may also function jointly as the Proxy Voting Committee for Merrill Lynch Bank & Trust Company FSB trust accounts managed by personnel dually-employed by BlackRock.
I. Scope of Committee Responsibilities
The Committee shall have the responsibility for determining how to address proxy votes made on behalf of all BlackRock clients, except for clients who have retained the right to vote their own proxies, either generally or on any specific matter. In so doing, the Committee shall seek to ensure that proxy votes are made in the best interests of clients, and that proxy votes are determined in a manner free from unwarranted or inappropriate influences. The Committee shall also oversee the overall administration of proxy voting for BlackRock accounts.
(7) The Committee shall establish BlackRock's proxy voting guidelines, with such advice, participation and research as the Committee deems appropriate from portfolio managers, proxy voting services or other knowledgeable interested parties. As it is anticipated that there will not necessarily be a "right" way to vote proxies on any given issue applicable to all facts and circumstances, the Committee shall also be responsible for determining how the proxy voting guidelines will be applied to specific proxy votes, in light of each issuer's unique structure, management, strategic options and, in certain circumstances, probable economic and other anticipated consequences of alternative actions. In so doing, the Committee may determine to vote a particular proxy in a manner contrary to its generally stated guidelines.
The Committee may determine that the subject matter of certain proxy issues are not suitable for general voting guidelines and requires a case-by-case determination, in which case the Committee may elect not to adopt a specific voting guideline applicable to such issues. BlackRock believes that certain proxy voting issues - such as approval of mergers and other significant corporate transactions - require investment analysis akin to investment decisions, and are therefore not suitable for general guidelines. The Committee may elect to adopt a common BlackRock position on certain proxy votes that are akin to investment decisions, or determine to permit portfolio managers to make individual decisions on how best to maximize economic value for the accounts for which they are responsible (similar to normal buy/sell investment decisions made by such portfolio managers).
(8) While it is expected that BlackRock, as a fiduciary, will generally seek to vote proxies over which BlackRock exercises voting authority in a uniform manner for all BlackRock clients, the Committee, in conjunction with the portfolio manager of an account, may determine that the specific circumstances of such account require that such account's proxies be voted differently due to such account's investment objective or other factors that differentiate it from other accounts. In addition, on proxy votes that are akin to investment decisions, BlackRock believes portfolio managers may from time to time
The Committee may delegate day-to-day administrative responsibilities to other BlackRock personnel and/or outside service providers, as appropriate. (8) The Committee will normally defer to portfolio managers on proxy votes that are akin to investment decisions except for proxy votes that involve a material conflict of interest, in which case it will determine, in its discretion, the appropriate voting process so as to address such conflict. legitimately reach differing but equally valid views, as fiduciaries for BlackRock's clients, on how best to maximize economic value in respect of a particular investment.
The Committee will also be responsible for ensuring the maintenance of records of each proxy vote, as required by Advisers Act Rule 204-2.(9) All records will be maintained in accordance with applicable law. Except as may be required by applicable legal requirements, or as otherwise set forth herein, the Committee's determinations and records shall be treated as proprietary, nonpublic and confidential.
The Committee shall be assisted by other BlackRock personnel, as may be appropriate. In particular, the Committee has delegated to the BlackRock Operations Department responsibility for monitoring corporate actions and ensuring that proxy votes are submitted in a timely fashion. The Operations Department shall ensure that proxy voting issues are promptly brought to the Committee's attention and that the Committee's proxy voting decisions are appropriately disseminated and implemented.
To assist BlackRock in voting proxies, the Committee may retain the services of a firm providing such services. BlackRock has currently retained Institutional Shareholder Services ("ISS") in that role. ISS is an independent adviser that specializes in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided to BlackRock may include, but are not limited to, in-depth research, voting recommendations (which the Committee is not obligated to follow), vote execution, and recordkeeping.
(9) The Committee may delegate the actual maintenance of such records to an outside service provider. Currently, the Committee has delegated the maintenance of such records to Institutional Shareholder Services.
II. Special Circumstances
Routine Consents. BlackRock may be asked from time to time to consent to an amendment to, or grant a waiver under, a loan agreement, partnership agreement, indenture or other governing document of a specific financial instrument held by BlackRock clients. BlackRock will generally treat such requests for consents not as "proxies" subject to these Proxy Voting Policies and Procedures but as investment matters to be dealt with by the responsible BlackRock investment professionals would, provided that such consents (i) do not relate to the election of a board of directors or appointment of auditors of a public company, and (ii) either (A) would not otherwise materially affect the structure, management or control of a public company, or (B) relate to a company in which BlackRock clients hold only interests in bank loans or debt securities and are consistent with customary standards and practices for such instruments.
Securities on Loan. Registered investment companies that are advised by BlackRock as well as certain of our advisory clients may participate in securities lending programs. Under most securities lending arrangements, securities on loan may not be voted by the lender (unless the loan is recalled). BlackRock believes that each client has the right to determine whether participating in a securities lending program enhances returns, to contract with the securities lending agent of its choice and to structure a securities lending program, through its lending agent, that balances any tension between loaning and voting securities in a matter that satisfies such client. If client has decided to participate in a securities lending program, BlackRock will therefore defer to the client's determination and not attempt to seek recalls solely for the purpose of voting routine proxies as this could impact the returns received from securities lending and make the client a less desirable lender in a marketplace. Where a client retains a lending agent that is unaffiliated with BlackRock, BlackRock will generally not seek to vote proxies relating to securities on loan because BlackRock does not have a contractual right to recall such loaned securities for the purpose of voting proxies. Where BlackRock or an affiliate acts as the lending agent, BlackRock will also generally not seek to recall loaned securities for proxy voting purposes, unless the portfolio manager responsible for the account or the Committee determines that voting the proxy is in the client's best interest and requests that the security be recalled.
Voting Proxies for Non-US Companies. While the proxy voting process is well
established in the United States, voting proxies of non-US companies frequently
involves logistical issues which can affect BlackRock's ability to vote such
proxies, as well as the desirability of voting such proxies. These issues
include (but are not limited to): (i) untimely notice of shareholder meetings,
(ii) restrictions on a foreigner's ability to exercise votes, (iii) requirements
to vote proxies in person, (iv) "shareblocking" (requirements that investors who
exercise their voting rights surrender the right to dispose of their holdings
for some specified period in proximity to the shareholder meeting), (v)
potential difficulties in translating the proxy, and (vi) requirements to
provide local agents with unrestricted powers of attorney to facilitate voting
instructions.
As a consequence, BlackRock votes proxies of non-US companies only on a "best-efforts" basis. In addition, the Committee may determine that it is generally in the best interests of BlackRock clients not to vote proxies of companies in certain countries if the Committee determines that the costs (including but not limited to opportunity costs associated with shareblocking constraints) associated with exercising a vote generally are expected to outweigh the benefit the client will derive by voting on the issuer's proposal.
If the Committee so determines in the case of a particular country, the Committee (upon advice from BlackRock portfolio managers) may override such determination with respect to a particular issuer's shareholder meeting if the Committee believes the benefits of seeking to exercise a vote at such meeting outweighs the costs, in which case BlackRock will seek to vote on a best-efforts basis.
Securities Sold After Record Date. With respect to votes in connection with securities held on a particular record date but sold from a client account prior to the holding of the related meeting, BlackRock may take no action on proposals to be voted on in such meeting.
Conflicts of Interest. From time to time, BlackRock may be required to vote proxies in respect of an issuer that is an affiliate of BlackRock (a "BlackRock Affiliate"), or a money management or other client of BlackRock (a "BlackRock Client").(10) In such event, provided that the Committee is aware of the real or potential conflict, the following procedures apply:
The Committee intends to adhere to the voting guidelines set forth herein for all proxy issues including matters involving BlackRock Affiliates and BlackRock Clients. The Committee may, in its discretion for the purposes of ensuring that an independent determination is reached, retain an independent fiduciary to advise the Committee on how to vote or to cast votes on behalf of BlackRock's clients; and if the Committee determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Committee shall determine how to vote the proxy after consulting with the BlackRock Legal and Compliance Department and concluding that the vote cast is in the client's best interest notwithstanding the conflict.
(10) Such issuers may include investment companies for which BlackRock provides investment advisory, administrative and/or other services.
III. Voting Guidelines
The Committee has determined that it is appropriate and in the best interests of BlackRock's clients to adopt the following voting guidelines, which represent the Committee's usual voting position on certain recurring proxy issues that are not expected to involve unusual circumstances. With respect to any particular proxy issue, however, the Committee may elect to vote differently than a voting guideline if the Committee determines that doing so is, in the Committee's judgment, in the best interest of its clients. The guidelines may be reviewed at any time upon the request of any Committee member and may be amended or deleted upon the vote of a majority of voting Committee members present at a Committee meeting for which there is a quorum.
A. Boards of Directors
These proposals concern those issues submitted to shareholders relating to the composition of the Board of Directors of companies other than investment companies. As a general matter, the Committee believes that a company's Board of Directors (rather than shareholders) is most likely to have access to important, nonpublic information regarding a company's business and prospects, and is therefore best-positioned to set corporate policy and oversee management. The Committee therefore believes that the foundation of good corporate governance is the election of qualified, independent corporate directors who are likely to diligently represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over time. In individual cases, the Committee may look at a Director nominee's history of representing shareholder interests as a director of other companies, or other factors to the extent the Committee deems relevant.
The Committee's general policy is to vote:
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# VOTE and DESCRIPTION
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A.1 FOR nominees for director of United States companies in
uncontested elections, except for nominees who o have missed at
least two meetings and, as a result, attended less than 75% of
meetings of the Board of Directors and its committees the previous
year, unless the nominee missed the meeting(s) due to illness or
company business o voted to implement or renew a "dead-hand"
poison pill o ignored a shareholder proposal that was approved by
either a majority of the shares outstanding in any year or by the
majority of votes cast for two consecutive years o failed to act
on takeover offers where the majority of the shareholders have
tendered their shares are o corporate insiders who serve on the
audit, compensation or nominating committees or on a full Board
that does not have such committees composed exclusively of
independent directors o on a case-by-case basis, have served as
directors of other companies with allegedly poor corporate
governance o sit on more than six boards of public companies
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A.2 FOR nominees for directors of non-U.S. companies in uncontested
elections, except for nominees from whom the Committee determines
to withhold votes due to the nominees' poor records of
representing shareholder interests, on a case-by-case basis
------------- ------------------------------------------------------------------
A.3 FOR proposals to declassify Boards of Directors, except where
there exists a legitimate purpose for classifying boards
------------- ------------------------------------------------------------------
A.4 AGAINST proposals to classify Boards of Directors, except where
there exists a legitimate purpose for classifying boards
------------- -----------------------------------------------------------------
A.5 AGAINST proposals supporting cumulative voting
------------- ------------------------------------------------------------------
A.6 FOR proposals eliminating cumulative voting
------------- ------------------------------------------------------------------
A.7 FOR proposals supporting confidential voting
------------- ------------------------------------------------------------------
A.8 FOR proposals seeking election of supervisory board members
------------- ------------------------------------------------------------------
A.9 AGAINST shareholder proposals seeking additional representation of
women and/or minorities generally (i.e., not specific individuals)
to a Board of Directors
------------- ------------------------------------------------------------------
A.10 AGAINST shareholder proposals for term limits for directors
------------- ------------------------------------------------------------------
A.11 FOR shareholder proposals to establish a mandatory retirement age
for directors who attain the age of 72 or older
204
|
------------- ------------------------------------------------------------------
A.12 AGAINST shareholder proposals requiring directors to own a minimum
amount of company stock
------------- ------------------------------------------------------------------
A.13 FOR proposals requiring a majority of independent directors on a
Board of Directors
------------- ------------------------------------------------------------------
A.14 FOR proposals to allow a Board of Directors to delegate powers to
a committee or committees
------------- ------------------------------------------------------------------
A.15 FOR proposals to require audit, compensation and/or nominating
committees of a Board of Directors to consist exclusively of
independent directors
------------- ------------------------------------------------------------------
A.16 AGAINST shareholder proposals seeking to prohibit a single person
from occupying the roles of chairman and chief executive officer
------------- ------------------------------------------------------------------
A.17 FOR proposals to elect account inspectors
------------- ------------------------------------------------------------------
A.18 FOR proposals to fix the membership of a Board of Directors at a
specified size
------------- ------------------------------------------------------------------
A.19 FOR proposals permitting shareholder ability to nominate directors
directly
------------- ------------------------------------------------------------------
A.20 AGAINST proposals to eliminate shareholder ability to nominate
directors directly
------------ -------------------------------------------------------------------
A.21 FOR proposals permitting shareholder ability to remove directors
directly
------------- ------------------------------------------------------------------
A.22 AGAINST proposals to eliminate shareholder ability to remove
directors directly
------------- ------------------------------------------------------------------
|
B. Auditors
These proposals concern those issues submitted to shareholders related to the selection of auditors. As a general matter, the Committee believes that corporate auditors have a responsibility to represent the interests of shareholders and provide an independent view on the propriety of financial reporting decisions of corporate management. While the Committee will generally defer to a corporation's choice of auditor, in individual cases, the Committee may look at an auditors' history of representing shareholder interests as auditor of other companies, to the extent the Committee deems relevant.
The Committee's general policy is to vote:
------------- ------------------------------------------------------------------
B.1 FOR approval of independent auditors, except for o auditors that
have a financial interest in, or material association with, the
company they are auditing, and are therefore believed by the
Committee not to be independent o auditors who have rendered an
opinion to any company which in the Committee's opinion is either
not consistent with best accounting practices or not indicative of
the company's financial situation o on a case-by-case basis,
|
auditors who in the Committee's opinion provide a significant
amount of non-audit services to the company
------------- ------------------------------------------------------------------
B.2 FOR proposals seeking authorization to fix the remuneration of
auditors
------------- ------------------------------------------------------------------
B.3 FOR approving internal statutory auditors
------------- ------------------------------------------------------------------
B.4 FOR proposals for audit firm rotation, except for proposals that
would require rotation after a period of less than 5 years
------------- ------------------------------------------------------------------
|
C. Compensation and Benefits
These proposals concern those issues submitted to shareholders related to management compensation and employee benefits. As a general matter, the Committee favors disclosure of a company's compensation and benefit policies and opposes excessive compensation, but believes that compensation matters are normally best determined by a corporation's board of directors, rather than shareholders. Proposals to "micro-manage" a company's compensation practices or to set arbitrary restrictions on compensation or benefits will therefore generally not be supported.
The Committee's general policy is to vote:
------------- ------------------------------------------------------------------
C.1 IN ACCORDANCE WITH THE RECOMMENDATION OF ISS on compensation plans
if the ISS recommendation is based solely on whether or not the
company's plan satisfies the allowable cap as calculated by ISS.
If the recommendation of ISS is based on factors other than
whether the plan satisfies the allowable cap the Committee will
analyze the particular proposed plan. This policy applies to
amendments of plans as well as to initial approvals.
------------- ------------------------------------------------------------------
C.2 FOR proposals to eliminate retirement benefits for outside
directors
------------- ------------------------------------------------------------------
C.3 AGAINST proposals to establish retirement benefits for outside
directors
------------- ------------------------------------------------------------------
C.4 FOR proposals approving the remuneration of directors or of
supervisory board members
------------- ------------------------------------------------------------------
C.5 AGAINST proposals to reprice stock options
------------- ------------------------------------------------------------------
C.6 FOR proposals to approve employee stock purchase plans that apply
to all employees. This policy applies to proposals to amend ESPPs
if the plan as amended applies to all employees.
------------- ------------------------------------------------------------------
C.7 FOR proposals to pay retirement bonuses to directors of Japanese
companies unless the directors have served less than three years
------------- ------------------------------------------------------------------
C.8 AGAINST proposals seeking to pay outside directors only in stock
------------- ------------------------------------------------------------------
C.9 FOR proposals seeking further disclosure of executive pay or
requiring companies to report on their supplemental executive
retirement benefits
------------- ------------------------------------------------------------------
C.10 AGAINST proposals to ban all future stock or stock option grants
to executives
|
------------- ------------------------------------------------------------------
C.11 AGAINST option plans or grants that apply to directors or
employees of "related companies" without adequate disclosure of
the corporate relationship and justification of the option policy
------------- ------------------------------------------------------------------
C.12 FOR proposals to exclude pension plan income in the calculation of
earnings used in determining executive bonuses/compensation
------------- ------------------------------------------------------------------
|
D. Capital Structure
These proposals relate to various requests, principally from management, for approval of amendments that would alter the capital structure of a company, such as an increase in authorized shares. As a general matter, the Committee will support requests that it believes enhance the rights of common shareholders and oppose requests that appear to be unreasonably dilutive.
The Committee's general policy is to vote:
------------- ------------------------------------------------------------------
D.1 AGAINST proposals seeking authorization to issue shares without
preemptive rights except for issuances up to 10% of a non-US
company's total outstanding capital
------------- ------------------------------------------------------------------
D.2 FOR management proposals seeking preemptive rights or seeking
authorization to issue shares with preemptive rights
------------- ------------------------------------------------------------------
D.3 FOR management proposals approving share repurchase programs
------------- ------------------------------------------------------------------
D.4 FOR management proposals to split a company's stock
------------- ------------------------------------------------------------------
D.5 FOR management proposals to denominate or authorize denomination
of securities or other obligations or assets in Euros
------------- ------------------------------------------------------------------
D.6 FOR proposals requiring a company to expense stock options (unless
the company has already publicly committed to do so by a certain
date).
------------- ------------------------------------------------------------------
|
E. Corporate Charter and By-Laws
These proposals relate to various requests for approval of amendments to a corporation's charter or by-laws, principally for the purpose of adopting or redeeming "poison pills." As a general matter, the Committee opposes poison pill provisions.
The Committee's general policy is to vote:
------------- ------------------------------------------------------------------
E.1 AGAINST proposals seeking to adopt a poison pill
------------- ------------------------------------------------------------------
E.2 FOR proposals seeking to redeem a poison pill
------------- ------------------------------------------------------------------
E.3 FOR proposals seeking to have poison pills submitted to
shareholders for ratification
|
------------- ------------------------------------------------------------------ E.4 FOR management proposals to change the company's name ------------- ------------------------------------------------------------------ |
F. Corporate Meetings
These are routine proposals relating to various requests regarding the formalities of corporate meetings.
The Committee's general policy is to vote:
------------- ------------------------------------------------------------------
F.1 AGAINST proposals that seek authority to act on "any other
business that may arise"
------------- ------------------------------------------------------------------
F.2 FOR proposals designating two shareholders to keep minutes of the
meeting
------------- ------------------------------------------------------------------
F.3 FOR proposals concerning accepting or approving financial
statements and statutory reports
------------- ------------------------------------------------------------------
F.4 FOR proposals approving the discharge of management and the
supervisory board
------------- ------------------------------------------------------------------
F.5 FOR proposals approving the allocation of income and the dividend
------------- ------------------------------------------------------------------
F.6 FOR proposals seeking authorization to file required
documents/other formalities
------------- ------------------------------------------------------------------
F.7 FOR proposals to authorize the corporate board to ratify and
execute approved resolutions
------------- ------------------------------------------------------------------
F.8 FOR proposals appointing inspectors of elections
------------- ------------------------------------------------------------------
F.9 FOR proposals electing a chair of the meeting
------------- ------------------------------------------------------------------
F.10 FOR proposals to permit "virtual" shareholder meetings over the
Internet
------------- ------------------------------------------------------------------
F.11 AGAINST proposals to require rotating sites for shareholder
meetings
------------- ------------------------------------------------------------------
|
G. Investment Companies
These proposals relate to proxy issues that are associated solely with holdings of shares of investment companies, including, but not limited to, investment companies for which BlackRock provides investment advisory, administrative and/or other services. As with other types of companies, the Committee believes that a fund's Board of Directors (rather than its shareholders) is best-positioned to set fund policy and oversee management. However, the Committee opposes granting Boards of Directors authority over certain matters, such as changes to a fund's investment objective, that the Investment Company Act of 1940 envisions will be approved directly by shareholders.
The Committee's general policy is to vote:
------------- ------------------------------------------------------------------
G.1 FOR nominees for director of mutual funds in uncontested
elections, except for nominees o who have missed at least two
meetings and, as a result, attended less than 75% of meetings of
the Board of Directors and its committees the previous year,
unless the nominee missed the meeting due to illness or fund
business o ignore a shareholder proposal that was approved by
either a majority of the shares outstanding in any year or by the
majority of votes cast for two consecutive years o are interested
directors who serve on the audit or nominating committees or on a
full Board that does not have such committees composed exclusively
of independent directors o on a case-by-case basis, have served as
directors of companies with allegedly poor corporate governance
------------- ------------------------------------------------------------------
G.2 FOR the establishment of new series or classes of shares
------------- ------------------------------------------------------------------
G.3 AGAINST proposals to change a fund's investment objective to
nonfundamental
------------- ------------------------------------------------------------------
G.4 FOR proposals to establish a master-feeder structure or
authorizing the Board to approve a master-feeder structure without
a further shareholder vote
------------- ------------------------------------------------------------------
G.5 AGAINST a shareholder proposal for the establishment of a director
ownership requirement
------------- ------------------------------------------------------------------
G.6 FOR classified boards of closed-end investment companies
------------- ------------------------------------------------------------------
|
H. Environmental and Social Issues
These are shareholder proposals to limit corporate conduct in some manner that relates to the shareholder's environmental or social concerns. The Committee generally believes that annual shareholder meetings are inappropriate forums for the discussion of larger social issues, and opposes shareholder resolutions "micromanaging" corporate conduct or requesting release of information that would not help a shareholder evaluate an investment in the corporation as an economic matter. While the Committee is generally supportive of proposals to require corporate disclosure of matters that seem relevant and material to the economic interests of shareholders, the Committee is generally not supportive of proposals to require disclosure of corporate matters for other purposes.
The Committee's general policy is to vote:
------------- ------------------------------------------------------------------
H.1 AGAINST proposals seeking to have companies adopt international
codes of conduct
------------- ------------------------------------------------------------------
H.2 AGAINST proposals seeking to have companies provide non-required
|
reports on:
o environmental liabilities; o bank lending policies;
o corporate political contributions or activities;
o alcohol advertising and efforts to discourage drinking by
minors;
o costs and risk of doing business in any individual country;
o involvement in nuclear defense systems
------------- ------------------------------------------------------------------
H.3 AGAINST proposals requesting reports on Maquiladora operations or
on CERES principles
|
------------- ------------------------------------------------------------------ H.4 AGAINST proposals seeking implementation of the CERES principles ------------- ------------------------------------------------------------------ |
Notice to Clients
BlackRock will make records of any proxy vote it has made on behalf of a client available to such client upon request.(11) BlackRock will use its best efforts to treat proxy votes of clients as confidential, except as it may decide to best serve its clients' interests or as may be necessary to effect such votes or as may be required by law.
BlackRock encourage clients with an interest in particular proxy voting issues to make their views known to BlackRock, provided that, in the absence of specific written direction from a client on how to vote that client's proxies, BlackRock reserves the right to vote any proxy in a manner it deems in the best interests of its clients, as it determines in its sole discretion.
These policies are as of the date indicated on the cover hereof. The Committee may subsequently amend these policies at any time, without notice.
(11) Such request may be made to the client's portfolio or relationship manager or addressed in writing to Secretary, BlackRock Equity Investment Policy Oversight Committee, Legal and Compliance Department, BlackRock Inc., 40 East 52nd Street, New York, New York 10022.
GARTMORE GLOBAL PARTNERS
The corporate governance policy of Gartmore Global Partners (GGP) is intended to give our clients a voice in the companies in which they invest. That voice is being heard when GGP casts its clients' votes at company meetings. This document only summarizes GGP's position and for a fuller understanding reference must be made to GGP's full corporate governance statement.
CORPORATE GOVERNANCE
Corporate Governance establishes the appropriate corporate structure for wealth creation in the interests of shareholders. Policy needs to be applied flexibly, pragmatically and appropriately to the circumstances of the company. We take into account the corporate cultures of different countries but aim to apply the same principles.
GARTMORE'S POSITION
Voting rights are part of the value of an investment and to be used constructively in our clients' best interest. We aim to vote at General Meetings of companies in which we invest but recognize the practical difficulties which may prevent this in some markets. We support good practice in business and endorse the OECD Principles of Corporate Governance as part of the development of codes of best practice for individual markets.
VOTING GUIDELINES
[ ] Shareholder rights - should be protected. Shareholders should be able to participate in general meetings in proportion to their ownership of the company.
[ ] Capital issue and repurchase should be on equal terms to all holders.
[ ] Decisions on take-over bids are based on the long-term interests of our clients. Anti-takeover devices should not be used to shield management from accountability.
[ ] Board Structure - there should be sufficient independent non-executives to balance executive management.
[ ] Chairman and Chief Executive - these significantly different roles should be separated to prevent undue concentration of power within the company.
[ ] Board Committees - strong audit and remuneration committees composed principally of independent non-executive directors should be used to resolve conflicts of interest between executives and the company.
[ ] Service contracts - should not be of excessive length or used to shield executives who do not perform.
[ ] Re-election - all directors should be required to stand for re-election at regular intervals, at least every 3 years.
[ ] Incentive schemes - share based remuneration schemes should be subject to shareholder approval. We favor schemes which include challenging performance criteria.
GARTMORE'S PROCEDURES
We have a specialist corporate governance function which is responsible for developing and executing policy on behalf of our clients. It is headed by a senior executive with long experience in investment. The fund manager or research analyst with responsibility for our investment in a company reviews resolutions, casts a critical eye over governance, identifies and is actively involved in formulating our response to controversial issues. Where required GGP will take necessary steps to retain proxy voting records for the period of time as specified by regulations.
Conflicts of Interest
GGP recognizes that circumstances can occur where it faces an actual or perceived material conflict of interest in effecting the policy of voting proxies. Some of these potential conflicts of interest include, but are not limited to:
[ ] where GGP (or an affiliate) manages assets, administers employee benefit plans, or provides other financial services or products to companies whose management is soliciting proxies and failure to vote proxies in favor of the management of such a company may harm our (or an affiliate's) relationship with the company
[ ] where GGP (or an affiliate) may have a business relationship, not with the company, but with a proponent of a proxy proposal and where GGP (or an affiliate) may manage assets for the proponent
[ ] where GGP (or an affiliate) or any members of its staff may have personal or business relationships with participants in proxy contests, corporate directors or candidates for corporate directorships, or where GGP (or an affiliate) or any member of its staff may have a personal interest in the outcome of a particular matter before shareholders. Where such conflicts arise, arrangements will be made to ensure that decisions are taken in the long-term interests of clients as a whole. These arrangements may include:
o referring decisions to a senior manager unconnected with the day to day management of the fund concerned
o using the advice of an outside body
o approaching clients directly.
In order to avoid even the appearance of impropriety, in the event that GGP (or an affiliate) manages assets for a company, its pension plan, or related entity, GGP will not take into consideration this relationship and will vote proxies in that company solely in the best interest of all of our clients.
APPENDIX C - PORTFOLIO MANAGERS
INFORMATION AS OF DECEMBER 31, 2006
INVESTMENTS IN EACH FUND
Name of Portfolio Manager Fund Name Dollar Range of Investments in
Each Fund
Gartmore Mutual Funds Capital Trust, Nationwide Mutual Insurance Company, NorthPointe Capital LLC,
and Gartmore Morley Capital Management, Inc.
Christopher Baggini Gartmore Growth $10,001-50,000
Gartmore U.S. Growth Leaders $100,001-1,000,000
Gartmore U.S. Growth Leaders Long-Short
None
Alpha Benson Gartmore Tax-Free Income None
Mabel Brown Gartmore Bond Fund
Douglas Burtnick Gartmore Growth None
Gartmore U.S. Growth Leaders None
Gartmore U.S. Growth Leaders Long-Short None
Gartmore Global Financial Services None
Peter Cahill Gartmore Large Cap Value $100,001-1,000,000
Joseph Cerniglia Gartmore Nationwide $1-10,000
Mary Champagne Gartmore Value Opportunities None
NorthPointe Small Cap Value None
Gartmore Large Cap Value None
Gary Davis Gartmore Bond Fund $1-10,000
William Gerlach Gartmore Global Natural Resources None
Gartmore Small Cap Leaders None
Gartmore Small Cap None
Robert Glise Gartmore Mid Cap Growth $100,001-1,000,000
Gary Haubold Gartmore Nationwide None
Gartmore Nationwide Leaders None
Gartmore Small Cap None
Gartmore Small Cap Leaders None
Gary Hunt Gartmore Government Bond None
Shane Johnston Gartmore Short Duration Bond None
Gartmore Enhanced Income None
Karl Knas NorthPointe Small Cap Growth None
Gartmore Small Cap Leaders None
Jason Kotik Gartmore Global Natural Resources None
William H. Miller Gartmore Optimal Allocations Fund: Moderate
Gartmore Optimal Allocations Fund: None
Moderate Growth
Gartmore Optimal Allocations Fund: Growth None
Gartmore Optimal Allocations Fund:
Specialty None
Gartmore Optimal Allocations Fund: Defensive
Gartmore Investor Destinations Growth Fund None
Gartmore Investor Destinations Moderate
Growth Fund None
Gartmore Investor Destinations Moderate
Fund None
Gartmore Investor Destinations Moderately
Conservative Fund None
Gartmore Investor Destinations Conservative
Fund None
None
213
|
None
Joseph O'Connor Gartmore Mid Cap Growth Leaders None
Jeffrey Petherick Gartmore Value Opportunities None
NorthPointe Small Cap Value None
Gartmore Large Cap Value None
Perpetua Phillips Gartmore Short Duration Bond None
Gartmore Enhanced Income None
Charles Purcell Gartmore Small Cap None
Gartmore Small Cap Leaders None
Stuart Quint Gartmore Global Financial Services None
Jayne Stevlingson Gartmore Global Technology and
Communications None
Carl Wilk Gartmore Small Cap Leaders None
Gartmore Micro Cap Equity $100,001-1,000,000
NorthPointe Small Cap Growth None
Gartmore Global Partners
Charles Awdry Gartmore China Opportunities None
Brian ONeill Gartmore International Growth None
Gartmore Worldwide Leaders None
Christopher Palmer Gartmore Emerging Markets None
Neil Rogan Gartmore Worldwide Leaders None
Ben Walker Gartmore Global Utilities None
Gartmore International Growth None
Gartmore Worldwide Leaders None
BlackRock Investment Management, LLC
Debra Jelilian Gartmore S&P 500 Index None
Gartmore International Index None
Gartmore Mid Cap Market Index None
Gartmore Small Cap Index None
Jeffrey Russo Gartmore S&P 500 Index None
Gartmore International Index None
Gartmore Mid Cap Market Index None
Gartmore Small Cap Index None
Scott Amero Gartmore Bond Index Fund None
Keith Anderson Gartmore Bond Index Fund None
Matthew Mara Gartmore Bond Index Fund None
Andrew J. Phillips Gartmore Bond Index Fund None
|
DESCRIPTION OF COMPENSATION STRUCTURE
GARTMORE MUTUAL FUNDS CAPITAL TRUST, NATIONWIDE MUTUAL INSURANCE COMPANY, NORTHPOINTE CAPITAL, LLC, AND MORLEY CAPITAL MANAGEMENT, INC. (COLLECTIVELY, "NWD INVESTMENTS"):
NWD Investments uses a compensation structure that is designed to attract and retain high-caliber investment professionals. Portfolio managers are compensated based primarily on the scale and complexity of their portfolio responsibilities and the total return performance of mutual funds, other managed pooled vehicles and managed separate accounts over which they have responsibility, versus appropriate peer groups and benchmarks. Portfolio manager compensation is reviewed annually and may be modified at any time as appropriate to adjust the factors used to determine bonuses or other compensation components.
Each portfolio manager is paid a base salary that NWD Investments believes is industry competitive in light of the portfolio manager's experience and responsibility. In addition, each portfolio manager is eligible to receive an annual cash bonus that is derived from both quantitative and non-quantitative factors. Quantitative factors include fund/account performance and the financial performance of NWD Investments or its parent company. The performance of the investment companies and other accounts each portfolio manager manages has a paramount impact on such person's compensation. For equity funds, pre-tax performance is measured, on a one-year basis, for each of the previous three calendar years, as compared to each such fund's or account's stated benchmark index. Pre-tax investment performance of most fixed income portfolio managers is measured against a fund's stated benchmark over various time periods (e.g., on a one or three year basis, etc.). Additionally, mutual fund performance is measured against industry peer group rankings, which may provide performance rankings for both shorter periods as well as blended rankings for longer term performance. NWD Investments uses this dual approach in order to create incentives for portfolio managers to sustain favorable results from one year to the next, and to reward managers for performance that has improved considerably during the recent period. Less significant in annual compensation determinations are subjective factors as identified by NWD Investments' Chief Investment Officer or such other managers as may be appropriate.
The bonus determination components apply on an aggregate basis with respect to all accounts managed by a particular portfolio manager, including unregistered pooled investment vehicles and separate investment advisory accounts. The compensation of portfolio managers with other job responsibilities (such as managerial, providing analytical support for other accounts, etc.) will include consideration of the scope of such responsibilities and the managers' performance in meeting them. Funds and accounts that have performance-based advisory fees are not accorded disproportionate weightings in measuring aggregate portfolio manager performance.
Annual bonuses may vary significantly from one year to the next based on all of these factors. High performing portfolio managers may receive annual bonuses that constitute a substantial portion of their respective total compensation.
Portfolio managers also may be awarded unregistered restricted equity interests in a related NWD Investments entity that typically vest over time and are designed to create incentives to retain key talent and, they are eligible to participate in a non-qualified deferred compensation plan sponsored by Nationwide Mutual Life Insurance Company, NWD Investments' ultimate parent company. Such plan affords participating United States-based employees the tax benefits of deferring the receipt of a portion of their cash compensation. Portfolio managers also may participate in benefit plans and programs available generally to all NWD Investments employees.
BLACKROCK INVESTMENT MANAGEMENT, LLC
BlackRock's financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock such as its Long-Term Retention and Incentive Plan and Restricted Stock Program.
Base compensation. Generally, portfolio managers receive base compensation based on their seniority and/or their position with the firm.
Discretionary compensation. In addition to base compensation, portfolio managers may receive discretionary compensation, which can be a substantial portion of total compensation. Discretionary compensation can include a discretionary cash bonus as well as one or more of the following:
Long-Term Retention and Incentive Plan (LTIP)--The LTIP is a long-term incentive plan that seeks to reward certain key employees. The plan provides for the grant of awards that are expressed as an amount of cash that, if properly vested and subject to the attainment of certain performance goals, will be settled in cash and/or in BlackRock common stock.
Deferred Compensation Program - A portion of the compensation paid to each portfolio manager may be voluntarily deferred by the portfolio manager into an account that tracks the performance of certain of the firm's investment products. Each portfolio manager is permitted to allocate his or her deferred amounts among various options, including to certain of the firm's hedge funds and other unregistered products.
Options and Restricted Stock Awards--While incentive stock options are not currently being awarded to BlackRock employees, BlackRock previously granted stock options to key employees, including certain portfolio managers who may still hold unexercised or unvested options. BlackRock also has a restricted stock award program designed to reward certain key employees as an incentive to contribute to the long-term success of BlackRock. These awards vest over a period of years.
Incentive Savings Plans--The PNC Financial Services Group, Inc., which owns approximately 34% of BlackRock's common stock, has created a variety of incentive savings plans in which BlackRock employees are eligible to participate, including an Employee Stock Purchase Plan (ESPP) and a 401(k) plan. The 401(k) plan may involve a company match of the employee's contribution of up to 6% of the employee's salary. The company match is made using BlackRock common stock. The firm's 401(k) plan offers a range of investment options, including registered investment companies managed by the firm. Each portfolio manager is eligible to participate in these plans.
Annual incentive compensation for each portfolio manager is a function of several components: the performance of BlackRock, the performance of the portfolio manager's group within BlackRock, the investment performance, including risk-adjusted returns, of the firm's assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual's teamwork and contribution to the overall performance of these portfolios and BlackRock. Unlike many other firms, portfolio managers at BlackRock compete against benchmarks rather than each other. In most cases, including for the portfolio managers of the Fund, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Fund or other accounts are measured. A group of BlackRock officers determines the benchmarks against which to compare the performance of funds and other accounts managed by each portfolio manager. The group of BlackRock officers then makes a subjective determination with respect to the portfolio manager's compensation based on the performance of the funds and other accounts managed by each portfolio manager relative to the various benchmarks. Senior portfolio managers who perform additional management functions within BlackRock may receive additional compensation for serving in these other capacities.
OTHER BENEFITS
Portfolio managers are also eligible to participate in broad-based plans offered generally to Merrill Lynch employees, including broad-based retirement, 401(k), health, and other employee benefit plans.
GARTMORE GLOBAL PARTNERS
As well as receiving a fixed salary, GGP employees can also receive an annual bonus, according to individual performance - this forms a significant part of the remuneration package. The performance of each of GGP's associates is measured against pre-agreed measures that reflect the nature of the individual's role.
A portfolio manager's measures include:
o their funds' performance over one and three years when compared to the clients' benchmark
o the extent to which they deviate from their funds' risk parameters
A research analyst's measures include:
o the performance of their stock picks, using a sector neutral model, against the sector index
o their ability to rationalise and communicate stock selections to portfolio managers
All aspects of remuneration are benchmarked against independent market data, the market being defined by the businesses and industry sectors in which we compete for high-quality associates.
OTHER MANAGED ACCOUNTS
The following chart summarizes information regarding accounts other than the Fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into the following three categories: (1) mutual funds; (2) other pooled investment vehicles; and (3) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is provided separately.
------------------------------------------------- -------------------------------------------------------------------
NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND TOTAL
NAME OF PORTFOLIO MANAGER ASSETS BY CATEGORY
--------------------------------------------------------------------------------------------------------------- -----
GARTMORE MUTUAL FUNDS CAPITAL TRUST, NATIONWIDE MUTUAL INSURANCE COMPANY, NORTHPOINTE CAPITAL LLC, GARTMORE
MORLEY CAPITAL MANAGEMENT, INC. AND NWD MANAGEMENT & RESEARCH TRUST
------------------------------------------------- -------------------------------------------------------------------
Christopher Baggini Mutual Funds: 5 accounts, $688,213,834 total assets (2 accounts,
$185,484,717 total assets for which the advisory fee is based on
performance)
Other Pooled Investment
Vehicles: 4 accounts, $181,836,394 total assets (3 accounts,
79,695,609 total assets for which the advisory fee is based on
performance)
Other Accounts: 1 account, $13,233,494 total assets
------------------------------------------------- -------------------------------------------------------------------
Alpha Benson Mutual Funds: 1 account, $156,715,108 total assets
Other Pooled Investment
Vehicles: 1 account, $7,777,997,986 total assets
Other Accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
Mabel Brown Mutual Funds: 1 account, $96,434,484 total assets
Other Pooled Investment
Vehicles: 3 accounts, $1,188,000,000 total assets
Other Accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
Douglas Burtnick Mutual Funds: 9 accounts, $861,351,732 total assets (6 accounts,
$358,622,615 for which the advisory fee is based on performance)
Other Pooled Investment
Vehicles: 4 accounts, $181,836,394 total assets (3 accounts,
$79,695,609 total assets for which the advisory fee is based on
performance)
Other Accounts: 1 account, $13,233,494 total assets
------------------------------------------------- -------------------------------------------------------------------
Peter Cahill Mutual Funds: 1 account, $33,417,360 total assets
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 3 accounts, $30,355,899 total assets
------------------------------------------------- -------------------------------------------------------------------
Joseph Cerniglia Mutual Funds: 5 accounts, $461,070,089 total assets (Other Pooled
Investment
Vehicles: 5 accounts, $2,846,752,535 total assets
Other Accounts: 1 account, $480,000 total assets
------------------------------------------------- -------------------------------------------------------------------
Mary Champagne Mutual Funds: 2 accounts, $49,502,074 total assets
Other Pooled Investment
Vehicles: 1 account, $23,064,278 total assets
Other Accounts: 18 accounts, $865,220,005 total assets
------------------------------------------------- -------------------------------------------------------------------
Gary Davis Mutual Funds: 1 account, $96,434,484 total assets
Other Pooled Investment
Vehicles: 4 accounts, $1,200,000,000 total assets
Other Accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
William Gerlach Mutual Funds: 6 accounts, $2,886,706,636 total assets (1 account,
$50,200,922 total assets for which the advisory fee is based on
performance)
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 4 accounts, $252,834,373 total assets
------------------------------------------------- -------------------------------------------------------------------
Robert Glise Mutual Funds: 2 accounts, $351,378,322 total assets
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 15 accounts, $448,880,414 total assets
------------------------------------------------- -------------------------------------------------------------------
|
------------------------------------------------- -------------------------------------------------------------------
Gary Haubold Mutual Funds: 10 accounts, $4,925,108,635 total assets (2
accounts, $52,239,433 total assets for which the advisory fee is
based on performance)
Other Pooled Investment
Vehicles: 3 accounts, $81,763,580 total assets
Other Accounts: 9 accounts, $2,848,862,535 total assets
------------------------------------------------- -------------------------------------------------------------------
Gary Hunt Mutual Funds: 3 accounts, $1,521,370,000 total assets
Other Pooled Investment
Vehicles: 0 account, $0 total assets
Other Accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
Shane Johnston Mutual Funds: 2 accounts, $490,291,653 total assets
Other Pooled Investment
Vehicles: 2 accounts, $610,946,491 total assets
Other Accounts: 5 accounts, $874,815,901 total assets
------------------------------------------------- -------------------------------------------------------------------
Karl Knas Mutual Funds: 2 accounts, $87,044,498 total assets
Other Pooled Investment
Vehicles: 3 accounts, $48,198,969 total assets
Other Accounts: 42 accounts, $1,026,606,506 total assets
------------------------------------------------- -------------------------------------------------------------------
Jason Kotik Mutual Funds: 1 account, $50,200,922 total assets (advisory fee
is based on performance)
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
William Miller Mutual Funds: 14 accounts, $10,750,649,059 total assets
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 11 accounts, $2,581,752,411 total assets
------------------------------------------------- -------------------------------------------------------------------
Joseph O'Connor Mutual Funds: 1 account, $36,794,623 total assets
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 29 accounts, $20,808,693 total assets
------------------------------------------------- -------------------------------------------------------------------
Jeffrey Petherick Mutual Funds: 2 accounts, $49,502,074 total assets
Other Pooled Investment
Vehicles: 1 account, $23,064,278 total assets
Other Accounts: 18 accounts, $865,220,005 total assets
------------------------------------------------- -------------------------------------------------------------------
Perpetua Phillips Mutual Funds: 8 accounts, $490,291,653 total assets
Other Pooled Investment
Vehicles: 2 accounts, $4,198,738,328 total assets
Other Accounts: 3 accounts, $1,450,303,970 total assets
------------------------------------------------- -------------------------------------------------------------------
Charles Purcell Mutual Funds: 5 accounts, $1,099,912,348 total assets
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 4 accounts, $252,599,861 total assets
------------------------------------------------- -------------------------------------------------------------------
Stuart Quint Mutual Funds: 2 accounts, $85,111,751 total assets (both
accounts for which the advisory fee is based on performance)
Other Pooled Investment Vehicles: 0 accounts, $0 total assets
Other Accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
Jayne Stevlingson Mutual Funds: 3 accounts, $70,722,972 total assets (2 accounts,
$65,042,850 total assets for which the advisory fee is based on
performance)
Other Pooled Investment Vehicles: 2 accounts, $182,238,997 total
assets
Other accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
Carl Wilk Mutual Funds: 3 accounts, $194,748,079 total assets
Other Pooled Investment Vehicles: 3 accounts, $481,989,969 total
assets
Other Accounts: 3 accounts, $766,325,791 total assets
------------------------------------------------- -------------------------------------------------------------------
|
BLACKROCK INVESTMENT MANAGEMENT, LLC
------------------------------------------------- -------------------------------------------------------------------
Scott Amero Mutual Funds: 41 accounts, $31,400,000,000 total assets
Other Pooled Investment Vehicles: 31 accounts, $7,800,000,000
total assets (4 accounts, $1,600,000,000 total assets for which
the advisory fee is based on performance)
Other Accounts: 281 accounts, $94,100,000,000 total assets (24
accounts, $7,800,000,000 total assets for which the advisory fee
is based on performance)
------------------------------------------------- -------------------------------------------------------------------
Keith Anderson Mutual Funds: 25 accounts, $18,400,000,000 total assets
Other Pooled Investment Vehicles: 5 Accounts, $2,200,000,000
total assets (3 accounts, $2,100,000,000 total assets for which
the advisory fee is based on performance)
Other Accounts: 252 accounts, $92,300,000,000 total assets (19
accounts, $6,900,000,000 total assets for which the advisory fee
is based on performance)
------------------------------------------------- -------------------------------------------------------------------
Debra Jelilian Mutual Funds: 16 accounts, $8,473,926,988 total assets
Other Pooled Investment
Vehicles: 16 accounts, $12,341,383,765 total assets
Other Accounts: 26 accounts, $41,270,850,974 total assets
------------------------------------------------- -------------------------------------------------------------------
Matthew Marra Mutual Funds: 38 accounts, $22,200,000,000 total assets.
Other Pooled Investment Vehicles: 7 accounts, $1,400,000,000
total assets (3 accounts, $1,300,000,000 total assets for which
the advisory fee is based on performance)
Other Accounts: 324 accounts, $107,700,000,000 total assets (24
accounts, $8,100,000,000 total assets for which the advisory fee
is based on performance
------------------------------------------------- -------------------------------------------------------------------
Andrew J. Phillips Mutual Funds: 35 accounts, $21,900,000,000 total assets
Other Pooled Investment Vehicles: 10 accounts, $3,800,000,000
total assets (3 accounts, $1,400,000,000 total assets for which
the advisory fee is based on performance)
Other Accounts: 330 accounts, $121,000,000,000 total assets (20
accounts, $7,200,000,000 total assets for which the advisory fee
is based on performance)
------------------------------------------------- -------------------------------------------------------------------
Jeffrey Russo Mutual Funds: 11 accounts, $7,638,108,394 total assets (3
accounts, $170,052,193 total assets for which the advisory fee is
based on performance)
Other Pooled Investment
Vehicles: 27 accounts, $15,678,432,442 total assets (3 accounts,
$1,339,668,758 total assets for which the advisory fee is based
on performance)
Other Accounts: 36 accounts, $48,702,276,460 total assets (2
accounts, $3,535,355,086 for which the advisory fee is based on
performance)
------------------------------------------------- -------------------------------------------------------------------
GARTMORE GLOBAL PARTNERS
------------------------------------------------- -------------------------------------------------------------------
Charles Awdry Mutual Funds: 1 account, $42,342,056 total assets (advisory fee
is based on performance)
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 0 accounts, $0 total assets
------------------------------------------------- -------------------------------------------------------------------
|
------------------------------------------------- -------------------------------------------------------------------
Brian O'Neill Mutual Funds: 2 accounts, $160,552,396 total assets (both for
which the advisory fee is based on performance)
Other Pooled Investment
Vehicles: 3 accounts, $504,586,004 total assets
Other Accounts: 2 accounts, $59,661,940 total assets
------------------------------------------------- -------------------------------------------------------------------
Christopher Palmer Mutual Funds: 4 accounts, $948,314,456 total assets (3 accounts,
$761,179,600 total assets for which the advisory fee is based on
performance) Other Pooled
Investment
Vehicles: 4 accounts, $1,616,375,849 total assets
Other Accounts: 7 accounts, $687,185,402 total assets
------------------------------------------------- -------------------------------------------------------------------
Neil Rogan Mutual Funds: 2 accounts, $101,871,927 total assets (both for
which the advisory fee is based on performance)
Other Pooled Investment
Vehicles: 2 accounts, $658,849,500 total assets
Other Accounts: 3 accounts, $443,477,999 total assets (2
accounts, $297,297,497 total assets for which the advisory fee is
based on performance)
------------------------------------------------- -------------------------------------------------------------------
Ben Walker Mutual Funds: 4 accounts, $254,656,995 total assets (all for
which the advisory fee is based on performance)
Other Pooled Investment
Vehicles: 1 account, $69,919,465 total assets
Other Accounts: 3 accounts, $331,246,175 total assets (2
accounts, $297,297,497 total assets for which the advisory fee is
based on performance)
------------------------------------------------- -------------------------------------------------------------------
|
POTENTIAL CONFLICTS OF INTEREST
GARTMORE MUTUAL FUNDS CAPITAL TRUST, NATIONWIDE MUTUAL INSURANCE COMPANY, NORTHPOINTE CAPITAL LLC, AND GARTMORE MORLEY CAPITAL MANAGEMENT, INC. (COLLECTIVELY, "NWD INVESTMENTS"):
It is possible that conflicts of interest may arise in connection with the portfolio managers' management of the Funds on the one hand and other accounts for which the portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Fund and other accounts she advises. In addition, due to differences in the investment strategies or restrictions between the Fund and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Fund. In some cases, another account managed by the same portfolio manager may compensate NWD Investments or its affiliate based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, the portfolio manager will endeavor to exercise her discretion in a manner that she believes is equitable to all interested persons. The Trust has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
BLACKROCK INVESTMENT MANAGEMENT, LLC
Real, potential or apparent conflicts of interest may arise when a portfolio manager has day-to-day portfolio management responsibilities with respect to more than one fund or account, including the following:
Certain investments may be appropriate for the Portfolios and also for other clients advised by BlackRock and its affiliates, including other client accounts managed by a Portfolio's portfolio management team. Investment decisions for a Portfolio and other clients are made with a view to achieving their respective investment objectives and after consideration of such factors as their current holdings, availability of cash for investment and the size of their investments generally. Frequently, a particular security may be bought or sold for only one client or in different amounts and at different times for more than one but less
than all clients. Likewise, because clients of BlackRock and its affiliates may have differing investment strategies, a particular security may be bought for one or more clients when one or more other clients are selling the security. The investment results for a Portfolio may differ from the results achieved by other clients of BlackRock and its affiliates and results among clients may differ. In addition, purchases or sales of the same security may be made for two or more clients on the same day. In such event, such transactions will be allocated among the clients in a manner believed by BlackRock to be equitable to each. BlackRock will not determine allocations based on whether it receives a performance based fee from the client. In some cases, the allocation procedure could have an adverse effect on the price or amount of the securities purchased or sold by a Portfolio. Purchase and sale orders for a Portfolio may be combined with those of other clients of BlackRock and its affiliates in the interest of achieving the most favorable net results to the Portfolio.
To the extent that each Portfolio's portfolio management team has responsibilities for managing accounts in addition to the Portfolios, a portfolio manager will need to divide his time and attention among relevant accounts.
In some cases, a real, potential or apparent conflict may also arise where (i) BlackRock may have an incentive, such as a performance based fee, in managing one account and not with respect to other accounts it manages or (ii) where a member of a Portfolio's portfolio management team owns an interest in one fund or account he or she manages and not another.
GARTMORE GLOBAL PARTNERS (GGP)
GGP's place within the Financial Services Industry places an obligation on our Portfolio Constructors to demonstrate their independence of mind when advising or exercising discretion and on Dealers when executing bargains on behalf of our clients. If pressures or material interests are allowed to influence such decisions, the clients' best interests cannot be served. Portfolio Constructors and Dealers are bound by GGP's Chinese Walls policy. All GGP staff are expected to observe this policy. A sufficiently knowledgeable and appropriately classified client can agree to GGP running with a conflict of interest only if the client agreement contains a full account of likely conflict situations.
When providing advice, discretionary management or execution of bargains, any outside influences, which are in conflict with the client's best interests, or might be, are to be entirely disregarded. No policy should be adopted or arrangement agreed to if it restricts the free exercise of independent judgement: this includes agreeing to accept gifts or other inducements to place business. Any attempts by a third party to exert such pressure must be notified to Compliance. If a Portfolio Constructor relays advice which comes from outside GGP to his client, the client should be in no doubt of the Portfolio Constructor's opinion on this advice. If a Portfolio Constructor cannot satisfy these requirements, Compliance should be asked whether the client agreement needs to be changed. All conflicts of interest should be explained to the clients affected and a file note should be available, together with their written agreement.
The following controls are in place:
|_| The Chinese Walls Policy (management of confidential information)
|_| The use of risk assessment when negotiating and drafting client agreements
|_| The monitoring activities undertaken by Compliance, Risk, and Internal Audit.
|_| The Code of Ethics and Personal Account Dealing Rules.
STATEMENT OF ADDITIONAL INFORMATION
February 28, 2007
GARTMORE MUTUAL FUNDS
Gartmore Small Cap Core Fund
Gartmore Market Neutral Fund
Gartmore Mutual Funds (the "Trust"), a Delaware statutory trust, is a registered open-end management investment company consisting of 49 series as of the date hereof. This Statement of Additional Information ("SAI") relates to two series of the Trust referenced above (each, a "Fund" and collectively, the "Funds").
This SAI is not a prospectus but is incorporated by reference into the Prospectus for the Funds dated February 28, 2007 ("Prospectus"). It contains information in addition to and more detailed than that set forth in the Prospectus and should be read in conjunction with the Prospectus.
Terms not defined in this SAI have the meanings assigned to them in the Prospectus. The Prospectus may be obtained from Gartmore Mutual Funds, P.O. Box 182205, Columbus, Ohio 43218-2205, or by calling toll free 800-848-0920.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management plc (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
TABLE OF CONTENTS
Page
----
General Information and History............................................. 1
Additional Information on Portfolio Instruments and Investment Policies..... 1
Description of Portfolio Instruments and Investment Policies................ 4
Investment Restrictions..................................................... 27
Trustees and Officers of the Trust.......................................... 31
Investment Advisory and Other Services...................................... 40
Brokerage Allocation........................................................ 47
Purchases, Redemptions and Pricing of Shares................................ 49
Systematic Investment Strategies............................................ 50
Investor Privileges......................................................... 51
Investor Services........................................................... 53
Performance Advertising..................................................... 54
Additional Information...................................................... 54
Additional General Tax Information.......................................... 55
Major Shareholders.......................................................... 61
Financial Statements........................................................ 64
Appendix A - Debt Ratings................................................... A-1
Appendix B - Proxy Voting Guidelines Summaries.............................. B-1
Appendix C - Portfolio Managers ........................................... C-1
|
GENERAL INFORMATION AND HISTORY
|
Gartmore Mutual Funds (the "Trust"), formerly Nationwide Mutual Funds (until January 25, 2002) and Nationwide Investing Foundation III (until March 1, 2000), is an open-end management investment company formed under the laws of the state of Delaware by a Declaration of Trust dated February 28, 2005. The Trust, originally organized as an Ohio business trust under the laws of the state of Ohio by a Declaration of Trust dated October 30, 1997, redomesticated as a Delaware statutory trust on or about February 28, 2005 in a reorganization approved by vote of the shareholders of the Ohio business trust in a shareholders' meeting on December 23, 2004. In the reorganization the Ohio business trust transferred all of its assets to the Trust in exchange for shares of the Trust and assumption by the Trust of all of the liabilities of the Ohio business trust. The Trust currently consists of 49 separate series, each with its own investment objective. Each Fund is a diversified fund as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
The Funds invest in a variety of securities and employ a number of investment techniques that involve certain risks. The Prospectus for the Funds highlights the principal investment strategies, investment techniques and risks. This SAI contains additional information regarding both the principal and non-principal investment strategies of the Funds. The following table sets forth additional information concerning permissible investments and techniques for each of the Funds. A "Y" in the table indicates that the Fund may invest in or follow the corresponding instrument or technique. An empty box indicates that the Fund does not intend to invest in or follow the corresponding instrument or technique.
Please review the discussion in the Prospectus for further information regarding the investment objectives and policies of each Fund.
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Gartmore
Small Gartmore
Cap Market
Type of Investment or Technique Core Neutral
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U.S. common stocks Y Y
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Preferred stocks Y Y
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Small company stocks Y Y
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Special situation companies Y Y
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Illiquid securities Y Y
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Restricted securities Y Y
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When-issued / delayed-delivery securities Y Y
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Investment companies Y Y
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Real estate investment trusts (REITS) Y Y
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Securities of foreign issuers Y Y
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Depositary receipts Y Y
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Securities from developing countries/emerging Y Y
markets
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Convertible securities Y Y
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Long-term debt Y
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Long-term debt when originally issued but with
397 days or less remaining to maturity
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Short-term debt Y Y
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Floating and variable rate securities Y Y
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Zero coupon securities Y
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Pay-in-kind bonds
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Deferred payment securities
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Non-investment grade debt Y
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Loan participations and assignments Y Y
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Sovereign debt (foreign) (denominated in U.S. $) Y Y
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Foreign commercial paper (denominated in U.S. $)
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Duration
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U.S. government securities Y Y
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Money market instruments Y Y
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|
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Gartmore Gartmore
Small Market
Type of Investment or Technique Cap Core Neutral
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Mortgage-backed securities
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Stripped mortgage securities
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Collateralized mortgage obligations
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Mortgage dollar rolls
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Asset-backed securities
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Bank and/or Savings and Loan obligations Y Y
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Repurchase agreements Y Y
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Derivatives Y Y
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Reverse repurchase agreements Y Y
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Warrants Y Y
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Futures Y Y
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Options Y Y
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Foreign currencies Y Y
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Forward currency contracts Y Y
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Borrowing money Y Y
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Lending portfolio securities Y Y
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Investment of securities lending collateral Y Y
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Short sales Y Y
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Participation Interests
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Swap Agreements Y Y
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Credit Default Swaps Y Y
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Wrap Contracts
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Indexed securities Y Y
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Strip Bonds
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Put Bonds
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Private Activity and Industrial Development
Bonds
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Custodial Receipts
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Nationwide Contract
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Extendable Commercial Notes
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Standby Commitment Agreements
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Municipal Securities
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Equity Linked Notes
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Exchange Traded Funds Y Y
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|
DESCRIPTION OF PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
Debt Obligations
Debt obligations are subject to the risk of an issuer's inability to meet principal and interest payments on its obligations when due ("credit risk") and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, and general market liquidity. Lower-rated securities are more likely to react to developments affecting these risks than are more highly rated securities, which react primarily to movements in the general level of interest rates. Although the fluctuation in the price of debt securities is normally less than that of common stocks, in the past there have been extended periods of cyclical increases in interest rates that have caused significant declines in the price of debt securities in general and have caused the effective maturity of securities with prepayment features to be extended, thus effectively converting short or intermediate-term securities (which tend to be less volatile in price) into long term securities (which tend to be more volatile in price).
Ratings as Investment Criteria. High-quality, medium-quality and non-investment grade debt obligations are characterized as such based on their ratings by nationally recognized statistical rating organizations ("NRSROs"), such as Standard & Poor's Rating Group ("Standard & Poor's") or Moody's Investor Services ("Moody's"). In general, the ratings of NRSROs represent the opinions of these agencies as to the quality of securities that they rate. Such ratings, however, are relative and subjective, and are not absolute standards of quality and do not evaluate the market value risk of the securities. These ratings are used by a Fund as initial criteria for the selection of portfolio securities, but the Fund also relies upon the independent advice of the Fund's adviser to evaluate potential investments. This is particularly important for lower-quality securities. Among the factors that will be considered is the long-term ability of the issuer to pay principal and interest and general economic trends, as well as an issuer's capital structure, existing debt and earnings history. The Appendix to this Statement of Additional Information contains further information about the rating categories of NRSROs and their significance.
Subsequent to its purchase by a Fund, an issuer of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. In addition, it is possible that an NRSRO might not change its rating of a particular issuer to reflect subsequent events. None of these events generally will require sale of such securities, but a Fund's adviser will consider such events in its determination of whether a Fund should continue to hold the securities.
In addition, to the extent that the ratings change as a result of changes in an NRSRO or its rating systems, or due to a corporate reorganization, the Fund will attempt to use comparable ratings as standards for its investments in accordance with its investment objective and policies.
Medium-Quality Securities. The Funds anticipate investing in medium-quality obligations, which are obligations rated in the fourth highest rating category by any NRSRO. Medium-quality securities, although considered investment-grade, may have some speculative characteristics and may be subject to greater fluctuations in value than higher-rated securities. In addition, the issuers of medium-quality securities may be more vulnerable to adverse economic conditions or changing circumstances than issuers of higher-rated securities.
Lower-Quality (High-Risk) Securities. Non-investment grade debt or lower-quality/rated securities (hereinafter referred to as "lower-quality securities") include (i) bonds rated as low as C by Moody's, Standard & Poor's, or Fitch, Inc. ("Fitch"), (ii) commercial paper rated as low as C by Standard & Poor's, Not Prime by Moody's or Fitch 4 by Fitch; and (iii) unrated debt securities of comparable quality. Lower-quality securities, while
generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. There is more risk associated with these investments because of reduced creditworthiness and increased risk of default. Under NRSRO guidelines, lower-quality securities and comparable unrated securities will likely have some quality and protective characteristics that are outweighed by large uncertainties or major risk exposures to adverse conditions. Lower-quality securities are considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default or to be in default, to be unlikely to have the capacity to make required interest payments and repay principal when due in the event of adverse business, financial or economic conditions, or to be in default or not current in the payment of interest or principal. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below.
Effect of Interest Rates and Economic Changes. Interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality and comparable unrated securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations may also be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities also because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower-quality or comparable unrated security defaulted, the Fund might incur additional expenses to seek recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of these securities and thus in the Fund's net asset value.
As previously stated, the value of a lower-quality or comparable unrated security will generally decrease in a rising interest rate market, and accordingly so will the Fund's net asset value. If the Fund experiences unexpected net redemptions in such a market, it may be forced to liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of lower-quality and comparable unrated securities (discussed below), the Fund may be forced to liquidate these securities at a substantial discount which would result in a lower rate of return to the Fund.
Payment Expectations. Lower-quality and comparable unrated securities typically contain redemption, call or prepayment provisions which permit the issuer of such securities containing such provisions to, at its discretion, redeem the securities. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities at a lower interest rate. To the extent an issuer is able to refinance the securities, or otherwise redeem them, a Fund may have to replace the securities with a lower yielding security, which would result in a lower return for the Fund.
Liquidity and Valuation. The Funds may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower-quality and comparable unrated securities, there may be no established retail secondary market for many of these securities. The Funds anticipate that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. As a result, a Fund's net asset value and ability to dispose of particular securities, when necessary to meet the Fund's liquidity needs or in response to a specific economic event, may be impacted. The lack of a liquid secondary market for certain securities may also make it more difficult for the Fund to obtain accurate market quotations for purposes of valuing the Fund's portfolio. Market quotations are generally available on many lower quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of lower quality and comparable unrated securities, especially in a thinly traded market.
- U.S. Government Securities. U.S. government securities are issued or guaranteed by the U.S. government or its agencies or instrumentalities. Securities issued by the U.S. government include U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities issued by government agencies or instrumentalities include obligations of the following:
- The Federal Housing Administration and the Farmers Home Administration;
- The Government National Mortgage Association ("GNMA"), including GNMA pass-through certificates, which are backed by the full faith and credit of the United States government;
- The Federal Home Loan Banks, whose securities are supported only by the credit of such agency;
- The Federal Farm Credit Banks, government-sponsored institutions that consolidate the financing activities of the Federal Land Banks, the Federal Intermediate Credit Banks and the Banks for Cooperatives; and
- The Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA"), whose securities are supported only by the credit of such agencies and are not guaranteed by the U.S. government. However, the Secretary of the Treasury has the authority to support FHLMC and FNMA by purchasing limited amounts of their respective obligations.
The U.S. government and its agencies and instrumentalities do not guarantee the market value of their securities; consequently, the value of such securities will fluctuate.
The Federal Reserve creates STRIPS (Separate Trading of Registered Interest and Principal of Securities) by separating the coupon payments and the principal payment from an outstanding Treasury security and selling them as individual securities. To the extent the Fund purchases the principal portion of STRIPS, the Fund will not receive regular interest payments. Instead STRIPS are sold at a deep discount from their face value. Because the principal portion of the STRIPS does not pay current income, its price can be volatile when interest rates change. In calculating their dividends, the Funds take into account as income a portion of the difference between the principal portion of a STRIPS' purchase price and its face value.
Brady Bonds. Brady Bonds are debt securities, generally denominated in U.S. dollars, issued under the framework of the Brady Plan. The Brady Plan is an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. In restructuring its external debt under the Brady Plan framework, a debtor nation negotiates with its existing bank lenders as well as multilateral institutions such as the International Bank for Reconstruction and Development (the "World Bank") and the International Monetary Fund (the "IMF"). The Brady Plan framework, as it has developed, contemplates the exchange of external commercial bank debt for newly issued bonds known as "Brady Bonds." Brady Bonds may also be issued in respect of new money being advanced by existing lenders in connection with the debt restructuring. The World Bank and/or the IMF support the restructuring by providing funds pursuant to loan agreements or other arrangements that enable the debtor nation to collateralize the new Brady Bonds or to repurchase outstanding bank debt at a discount. Under these arrangements with the World Bank and/or the IMF, debtor nations have been required to agree to the implementation of certain domestic monetary and fiscal reforms. Such reforms have included the liberalization of trade and foreign investment, the privatization of state-owned enterprises and the setting of targets for public spending and borrowing. These policies and programs seek to promote the debtor country's economic growth and development. Investors should also recognize that the Brady Plan only sets forth general guiding principles for economic reform and debt reduction, emphasizing that solutions must be negotiated on a case-by-case basis between debtor nations and their creditors. The Funds' adviser may believe that economic reforms undertaken by countries in connection with the issuance of Brady Bonds may make the debt of countries which have issued or have announced plans to issue Brady Bonds an attractive opportunity for investment. However, there can be no assurance that the adviser or the subadviser's expectations with respect to Brady Bonds will be realized.
Agreements implemented under the Brady Plan to date are designed to achieve debt and debt-service reduction through specific options negotiated by a debtor nation with its creditors. As a result, the financial packages offered by each country differ. The types of options have included the exchange of outstanding commercial bank
debt for bonds issued at 100% of face value of such debt which carry a below-market stated rate of interest (generally known as par bonds), bonds issued at a discount from the face value of such debt (generally known as discount bonds), bonds bearing an interest rate which increases over time and bonds issued in exchange for the advancement of new money by existing lenders. Regardless of the stated face amount and stated interest rate of the various types of Brady Bonds, the applicable Funds will purchase Brady Bonds in secondary markets, as described below, in which the price and yield to the investor reflect market conditions at the time of purchase. Certain sovereign bonds are entitled to "value recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Certain Brady Bonds have been collateralized as to principal due date at maturity (typically 30 years from the date of issuance) by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of such Brady Bonds. The U.S. Treasury bonds purchased as collateral for such Brady Bonds are financed by the IMF, the World Bank and the debtor nations' reserves. In addition, interest payments on certain types of Brady Bonds may be collateralized by cash or high-grade securities in amounts that typically represent between 12 and 18 months of interest accruals on these instruments with the balance of the interest accruals being uncollateralized. In the event of a default with respect to collateralized Brady Bonds as a result of which the payment obligations of the issuer are accelerated, the U.S. Treasury zero coupon obligations held as collateral for the payment of principal will not be distributed to investors, nor will such obligations be sold and the proceeds distributed. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds, which will continue to be outstanding, at which time the fact amount of the collateral will equal the principal payments that would have then been due on the Brady Bonds in the normal course. However, in light of the residual risk of the Brady Bonds and, among other factors, the history of default with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds are considered speculative. The Fund may purchase Brady Bonds with no or limited collateralization, and, for payment of interest and (except in the case of principal collateralized Brady Bonds) principal, will be relying primarily on the willingness and ability of the foreign government to make payment in accordance with the terms of the Brady Bonds.
Foreign Sovereign Debt. The Funds may invest in sovereign debt obligations issued by foreign governments. To the extent that the Funds invest in obligations issued by developing or emerging markets, these investments involve additional risks. Sovereign obligors in developing and emerging market countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. These obligors have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiation new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit for finance interest payments. Holders of certain foreign sovereign debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the foreign sovereign debt securities in which the Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit which may adversely affect the Fund's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants.
Credit Default Swaps. Each Fund may enter into credit default swap contracts. The Fund might use credit default swap contracts to limit or to reduce risk exposure of the Fund to defaults of corporate and sovereign issuers (i.e., to reduce risk when the Fund owns or has exposure to such issuers). A Fund also might use credit default swap contracts to create direct or synthetic short or long exposure to domestic or foreign corporate debt securities or certain sovereign debt securities to which the Fund is not otherwise exposed.
As the seller in a credit default swap contract, the Fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default (or similar event) by a third party, such as a U.S. or foreign issuer, on the debt obligation. In return, the Fund would receive from the counterparty a periodic stream of payments over the term of the contract, provided that no event of default (or similar event) occurs. If no event of default (or similar event) occurs, the Fund would keep the stream of payments and would have no payment of obligations. As the seller in a credit default swap contract, the Fund effectively would add economic leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap.
As the purchaser in a credit default swap contract, the Fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment might expire worthless. It also would involve credit risk - that the seller may fail to satisfy its payment obligations to the Fund in the event of a default (or similar event). As the purchaser in a credit default swap contract, the Fund's investment would generate income only in the event of an actual default (or similar event) by the issuer of the underlying obligation.
Money Market Instruments
Money market instruments may include the following types of instruments:
-- obligations issued or guaranteed as to interest and principal by the U.S. government, its agencies, or instrumentalities, or any federally chartered corporation, with remaining maturities of 397 days or less;
-- obligations of sovereign foreign governments, their agencies, instrumentalities and political subdivisions, with remaining maturities of 397 days or less;
-- obligations of municipalities and states, their agencies and political subdivisions with remaining maturities of 397 days or less;
-- asset-backed commercial paper whose own rating or the rating of any guarantor is in one of the two highest categories of any NRSRO;
-- repurchase agreements;
-- bank or savings and loan obligations;
-- commercial paper (including asset-backed commercial paper), which are short-term unsecured promissory notes issued by corporations in order to finance their current operations. It may also be issued by foreign governments, and states and municipalities. Generally the commercial paper or its guarantor will be rated within the top two rating categories by a NRSRO, or if not rated, is issued and guaranteed as to payment of principal and interest by companies which at the date of investment have a high quality outstanding debt issue;
-- bank loan participation agreements representing obligations of corporations having a high quality short-term rating, at the date of investment, and under which the Funds will look to the creditworthiness of the lender bank, which is obligated to make payments of principal and interest on the loan, as well as to creditworthiness of the borrower;
-- high quality short-term (maturity in 397 days or less) corporate obligations, rated within the top two rating categories by a NRSRO or, if not rated, deemed to be of comparable quality by the Fund's adviser;
-- extendable commercial notes, which differ from traditional commercial paper because the issuer can extend the maturity of the note up to 397 days with the option to call the note any time during the extension period; and
-- unrated short term (maturing in 397 days or less) debt obligations that are determined by a Fund's adviser to be of comparable quality to the securities described above.
Floating and Variable Rate Instruments
Floating or variable rate obligations bear interest at rates that are not fixed, but vary with changes in specified market rates or indices, such as the prime rate, or at specified intervals. The interest rate on floating-rate securities varies with changes in the underlying index (such as the Treasury bill rate), while the interest rate on variable or adjustable rate securities changes at preset times based upon an underlying index. Certain of the floating
or variable rate obligations that may be purchased by the Fund may carry a demand feature that would permit the holder to tender them back to the issuer of the instrument or to a third party at par value prior to maturity.
Some of the demand instruments purchased by the Funds may not be traded in a secondary market and derive their liquidity solely from the ability of the holder to demand repayment from the issuer or third party providing credit support. If a demand instrument is not traded in a secondary market, the Funds will nonetheless treat the instrument as "readily marketable" for the purposes of its investment restriction limiting investments in illiquid securities unless the demand feature has a notice period of more than seven days in which case the instrument will be characterized as "not readily marketable" and therefore illiquid.
Such obligations include variable rate master demand notes, which are unsecured instruments issued pursuant to an agreement between the issuer and the holder that permit the indebtedness thereunder to vary and to provide for periodic adjustments in the interest rate. Each Fund will limit its purchases of floating and variable rate obligations to those of the same quality as it is otherwise allowed to purchase. The Fund's adviser will monitor on an ongoing basis the ability of an issuer of a demand instrument to pay principal and interest on demand.
Each Fund's right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Fund elects to demand payment and the date payment is due that may affect the ability of the issuer of the instrument or third party providing credit support to make payment when due, except when such demand instruments permit same day settlement. To facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than the Fund's custodian subject to a subcustodian agreement approved by the Fund between that bank and the Fund's custodian.
Zero Coupon Securities (Gartmore Market Neutral Fund)
Zero coupon securities are debt securities that pay no cash income but are sold at substantial discounts from their value at maturity. When a zero coupon security is held to maturity, its entire return, which consists of the amortization of discount, comes from the difference between its purchase price and its maturity value. This difference is known at the time of purchase, so that investors holding zero coupon securities until maturity know at the time of their investment what the expected return on their investment will be. Zero coupon securities may have conversion features.
Zero coupon securities tend to be subject to greater price fluctuations in response to changes in interest rates than are ordinary interest-paying debt securities with similar maturities. The value of zero coupon securities appreciates more during periods of declining interest rates and depreciates more during periods of rising interest rates than ordinary interest-paying debt securities with similar maturities. Zero coupon securities may be issued by a wide variety of corporate and governmental issuers. Although these instruments are generally not traded on a national securities exchange, they are widely traded by brokers and dealers and, to such extent, will not be considered illiquid for the purposes of the Fund's limitation on investments in illiquid securities.
Loan Participations and Assignments
Loan Participations typically will result in a Fund having a contractual relationship only with the lender, not with the borrower. A Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Loan Participations, a Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Fund will assume the credit risk of both the borrower and the lender that is selling the Participation. In the event of the insolvency of the lender selling a Participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. A Fund will acquire Loan Participations only if the lender interpositioned between the Fund and the borrower is determined by the applicable adviser to be creditworthy. When a Fund purchases Assignments from lenders, the
Fund will acquire direct rights against the borrower on the loan, except that under certain circumstances such rights may be more limited than those held by the assigning lender.
A Fund may have difficulty disposing of Assignments and Loan Participations. Because the market for such instruments is not highly liquid, the Funds anticipate that such instruments could be sold only to a limited number of institutional investors. The lack of a highly liquid secondary market may have an adverse impact on the value of such instruments and will have an adverse impact on a Fund's ability to dispose of particular Assignments or Loan Participations in response to a specific economic event, such as deterioration in the creditworthiness of the borrower.
In valuing a Loan Participation or Assignment held by a Fund for which a secondary trading market exists, the Fund will rely upon prices or quotations provided by banks, dealers or pricing services. To the extent a secondary trading market does not exist, a Fund's Loan Participations and Assignments will be valued in accordance with procedures adopted by the Board of Trustees, taking into consideration, among other factors: (i) the creditworthiness of the borrower under the loan and the lender; (ii) the current interest rate; period until next rate reset and maturity of the loan; (iii) recent prices in the market for similar loans; and (iv) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.
Reverse Repurchase Agreements
The Funds may engage in reverse repurchase agreements to facilitate portfolio liquidity, a practice common in the mutual fund industry, or for arbitrage transactions discussed below. In a reverse repurchase agreement, a Fund would sell a security and enter into an agreement to repurchase the security at a specified future date and price. A Fund generally retains the right to interest and principal payments on the security. Since the Fund receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing (see "Borrowing"). When required by guidelines of the SEC, the Fund will segregate or earmark permissible liquid assets to secure its obligations to repurchase the security. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain segregated or earmarked liquid assets with an approved custodian having a value not less than the repurchase price (including accrued interest). The segregated or earmarked liquid assets will be marked-to-market daily and additional assets will be segregated or earmarked on any day in which the assets fall below the repurchase price (plus accrued interest). A Fund's liquidity and ability to manage its assets might be affected when it sets aside cash or portfolio securities to cover such commitments. Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale may decline below the price of the securities a Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities, and the Fund's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such determination. Reverse repurchase agreements are considered to be borrowings under the 1940 Act.
Reverse repurchase agreements may be used as arbitrage transactions in which a Fund will maintain an offsetting position in investment grade debt obligations or reverse repurchase agreements. Since a Fund will receive interest on the securities or repurchase agreements in which it invests the transaction proceeds, such transactions may involve leverage. However, since such securities or repurchase agreements will be high quality and will mature on or before the settlement date of the reverse repurchase agreement, the Fund's adviser believes that such arbitrage transactions do not present the risks to the Fund that are associated with other types of leverage.
Small Company and Emerging Growth Stocks
Investing in securities of small-sized, including micro-capitalization companies and emerging growth companies, may involve greater risks than investing in the stocks of larger, more established companies, including possible risk of loss. Also, because these securities may have limited marketability, their prices may be more volatile than securities of larger, more established companies or the market averages in general. Because small-sized and emerging growth companies normally have fewer shares outstanding than larger companies, it may be more difficult for the Funds to buy or sell significant numbers of such shares without an unfavorable impact on prevailing prices. Small-sized and emerging growth companies may have limited product lines, markets or financial resources
and may lack management depth. In addition, small-sized and emerging growth companies are typically subject to wider variations in earnings and business prospects than are larger, more established companies. There is typically less publicly available information concerning small-sized and emerging growth companies than for larger, more established ones.
Special Situation Companies
"Special situation companies" include those involved in an actual or prospective acquisition or consolidation; reorganization; recapitalization; merger, liquidation or distribution of cash, securities or other assets; a tender or exchange offer; a breakup or workout of a holding company; or litigation which, if resolved favorably, would improve the value of the company's stock. If the actual or prospective situation does not materialize as anticipated, the market price of the securities of a "special situation company" may decline significantly. Therefore, an investment in the Funds may involve a greater degree of risk than an investment in other mutual funds that seek long-term growth of capital by investing in better-known, larger companies. The Funds' adviser believes, however, that if it analyzes "special situation companies" carefully and invests in the securities of these companies at the appropriate time, the Funds may achieve capital growth. There can be no assurance however, that a special situation that exists at the time a Fund makes its investment will be consummated under the terms and within the time period contemplated, if it is consummated at all.
Foreign Securities
Investing in foreign securities (including through the use of depositary receipts) involves certain special considerations which typically are not associated with investing in United States securities. Since investments in foreign companies will frequently be denominated in the currencies of foreign countries (these securities are translated into U.S. dollars on a daily basis in order to value a Fund's shares), and since the Funds may hold securities and funds in foreign currencies, the Funds may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, if any, and may incur costs in connection with conversions between various currencies. Most foreign stock markets, while growing in volume of trading activity, have less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of comparable domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than in the United States and, at times, volatility of price can be greater than in the United States. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on United States exchanges, although each Fund endeavors to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers and listed companies in foreign countries than in the United States. In addition, with respect to certain foreign countries, there is the possibility of exchange control restrictions, expropriation or confiscatory taxation, and political, economic or social instability, which could affect investments in those countries. Expropriation of assets refers to the possibility that a country's laws will prohibit the return to the United States of any monies, which a Fund has invested in the country. Foreign securities, such as those purchased by the Funds, may be subject to foreign government taxes, higher custodian fees, higher brokerage costs and dividend collection fees which could reduce the yield on such securities.
Foreign economies may differ favorably or unfavorably from the U.S. economy in various respects, including growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency, and balance of payments positions. Many foreign securities are less liquid and their prices more volatile than comparable U.S. securities. From time to time, foreign securities may be difficult to liquidate rapidly without adverse price effects.
Investment in Companies in Developing Countries. Investments may be made from time to time in companies in developing countries as well as in developed countries. Although there is no universally accepted definition, a developing country is generally considered to be a country which is in the initial stages of industrialization. Shareholders should be aware that investing in the equity and fixed income markets of developing countries involves exposure to unstable governments, economies based on only a few industries, and securities markets which trade a small number of securities. Securities markets of developing countries tend to be more
volatile than the markets of developed countries; however, such markets have in the past provided the opportunity for higher rates of return to investors.
The value and liquidity of investments in developing countries may be affected favorably or unfavorably by political, economic, fiscal, regulatory or other developments in the particular countries or neighboring regions. The extent of economic development, political stability and market depth of different countries varies widely. Certain countries in the Asia region, including Cambodia, China, Laos, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are either comparatively underdeveloped or are in the process of becoming developed. Such investments typically involve greater potential for gain or loss than investments in securities of issuers in developed countries.
The securities markets in developing countries are substantially smaller, less liquid and more volatile than the major securities markets in the United States. A high proportion of the shares of many issuers may be held by a limited number of persons and financial institutions, which may limit the number of shares available for investment by a Fund. Similarly, volume and liquidity in the bond markets in developing countries are less than in the United States and, at times, price volatility can be greater than in the United States. A limited number of issuers in developing countries' securities markets may represent a disproportionately large percentage of market capitalization and trading volume. The limited liquidity of securities markets in developing countries may also affect a Fund's ability to acquire or dispose of securities at the price and time it wishes to do so. Accordingly, during periods of rising securities prices in the more illiquid securities markets, a Fund's ability to participate fully in such price increases may be limited by its investment policy of investing not more than 15% of its total net assets in illiquid securities. Conversely, a Fund's inability to dispose fully and promptly of positions in declining markets will cause the Fund's net asset value to decline as the value of the unsold positions is marked to lower prices. In addition, securities markets in developing countries are susceptible to being influenced by large investors trading significant blocks of securities.
Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of the United States. Certain of such countries have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks described above, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the value of a Fund's investments in those countries and the availability to the Fund of additional investments in those countries.
Economies of developing countries may differ favorably or unfavorably from the United States' economy in such respects as rate of growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. As export-driven economies, the economies of countries in the Asia Region are affected by developments in the economies of their principal trading partners. Hong Kong, Japan and Taiwan have limited natural resources, resulting in dependence on foreign sources for certain raw materials and economic vulnerability to global fluctuations of price and supply.
Certain developing countries do not have comprehensive systems of laws, although substantial changes have occurred in many such countries in this regard in recent years. Laws regarding fiduciary duties of officers and directors and the protection of shareholders may not be well developed. Even where adequate law exists in such developing countries, it may be impossible to obtain swift and equitable enforcement of such law, or to obtain enforcement of the judgment by a court of another jurisdiction.
Trading in futures contracts on foreign commodity exchanges may be subject to the same or similar risks as trading in foreign securities.
Depositary Receipts. The Funds may invest in foreign securities by purchasing depositary receipts, including American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or other securities convertible into securities of issuers based in foreign countries. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. Generally, ADRs, in registered form, are denominated in U.S. dollars and are designed for use in the U.S. securities markets, GDRs, in bearer form, are issued and designed for use outside the United States and EDRs (also referred to as Continental Depositary Receipts ("CDRs")), in bearer form, may be denominated in other currencies
and are designed for use in European securities markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities. EDRs are European receipts evidencing a similar arrangement. GDRs are receipts typically issued by non-U.S. banks and trust companies that evidence ownership of either foreign or domestic securities. For purposes of a Fund's investment policies, ADRs, GDRs and EDRs are deemed to have the same classification as the underlying securities they represent. Thus, an ADR, GDR or EDR representing ownership of common stock will be treated as common stock.
The Funds may invest in depositary receipts through "sponsored" or "unsponsored" facilities. While ADRs issued under these two types of facilities are in some respects similar, there are distinctions between them relating to the rights and obligations of ADR holders and the practices of market participants.
A depositary may establish an unsponsored facility without participation by (or even necessarily the acquiescence of) the issuer of the deposited securities, although typically the depositary requests a letter of non-objection from such issuer prior to the establishment of the facility. Holders of unsponsored ADRs generally bear all the costs of such facilities. The depositary usually charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. dollars, the disposition of non-cash distributions, and the performance of other services. The depositary of an unsponsored facility frequently is under no obligation to pass through voting rights to ADR holders in respect of the deposited securities. In addition, an unsponsored facility is generally not obligated to distribute communications received from the issuer of the deposited securities or to disclose material information about such issuer in the U.S. and thus there may not be a correlation between such information and the market value of the depositary receipts. Unsponsored ADRs tend to be less liquid than sponsored ADRs.
Sponsored ADR facilities are created in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities enters into a deposit agreement with the depositary. The deposit agreement sets out the rights and responsibilities of the issuer, the depositary, and the ADR holders. With sponsored facilities, the issuer of the deposited securities generally will bear some of the costs relating to the facility (such as dividend payment fees of the depositary), although ADR holders continue to bear certain other costs (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositaries agree to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited securities.
Repurchase Agreements
In connection with the purchase by a Fund of a repurchase agreement from member banks of the Federal Reserve System or certain non-bank dealers, the Fund's custodian, or a subcustodian, will have custody of, and will segregate securities acquired by the Fund under such repurchase agreement. Repurchase agreements are contracts under which the buyer of a security simultaneously commits to resell the security to the seller at an agreed-upon price and date. Repurchase agreements are considered by the staff of the SEC to be loans by the Fund. Repurchase agreements may be entered into with respect to securities of the type in which the Fund may invest or government securities regardless of their remaining maturities, and will require that additional securities be deposited if the value of the securities purchased should decrease below resale price. Repurchase agreements involve certain risks in the event of default or insolvency by the other party, including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities, the risk of a possible decline in the value of the underlying securities during the period in which the Fund seeks to assert its rights to them, the risk of incurring expenses associated with asserting those rights and the risk of losing all or part of the income from the repurchase agreement. A Fund's adviser reviews the creditworthiness of those banks and non-bank dealers with which the Fund enters into repurchase agreements to evaluate these risks.
Bank Obligations
Bank obligations that may be purchased by a Fund include certificates of deposit, bankers' acceptances and fixed time deposits. A certificate of deposit is a short-term negotiable certificate issued by a commercial bank against funds deposited in the bank and is either interest-bearing or purchased on a discount basis. A bankers' acceptance is a short-term draft drawn on a commercial bank by a borrower, usually in connection with an
international commercial transaction. The borrower is liable for payment as is the bank, which unconditionally guarantees to pay the draft at its face amount on the maturity date. Fixed time deposits are obligations of branches of U.S. banks or foreign banks which are payable at a stated maturity date and bear a fixed rate of interest. Although fixed time deposits do not have a market, there are no contractual restrictions on the right to transfer a beneficial interest in the deposit to a third party.
Bank obligations may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulation. Bank obligations may be issued by domestic banks (including their branches located outside the United States), domestic and foreign branches of foreign banks and savings and loan associations.
Eurodollar and Yankee Obligations. Eurodollar bank obligations are dollar-denominated certificates of deposit and time deposits issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated obligations issued in the U.S. capital markets by foreign banks.
Eurodollar and Yankee bank obligations are subject to the same risks that pertain to domestic issues, notably credit risk, market risk and liquidity risk. Additionally, Eurodollar (and to a limited extent, Yankee) bank obligations are subject to certain sovereign risks and other risks associated with foreign investments. One such risk is the possibility that a sovereign country might prevent capital, in the form of dollars, from flowing across their borders. Other risks include: adverse political and economic developments; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes, and the expropriation or nationalization of foreign issues. However, Eurodollar and Yankee bank obligations held in a Fund will undergo the same credit analysis as domestic issuers in which the Underling Fund invests, and will have at least the same financial strength as the domestic issuers approved for the Fund.
When-Issued Securities and Delayed-Delivery Transactions
When securities are purchased by a Fund on a "when-issued" basis or purchased for delayed delivery, then payment and delivery occur beyond the normal settlement date at a stated price and yield. When-issued transactions normally settle within 45 days. The payment obligation and the interest rate that will be received on when-issued securities are fixed at the time the buyer enters into the commitment. Due to fluctuations in the value of securities purchased or sold on a when-issued or delayed-delivery basis, the yields obtained on such securities may be higher or lower than the yields available in the market on the dates when the investments are actually delivered to the buyers. The greater a Fund's outstanding commitments for these securities, the greater the exposure to potential fluctuations in the net asset value of the Fund. Purchasing when-issued or delayed-delivery securities may involve the additional risk that the yield or market price available in the market when the delivery occurs may be higher or the market price lower than that obtained at the time of commitment.
When a Fund agrees to purchase when-issued or delayed-delivery securities, to the extent required by the SEC, its custodian will set aside permissible liquid assets equal to the amount of the commitment in a segregated account. Normally, the custodian will set aside portfolio securities to satisfy a purchase commitment, and in such a case a Fund may be required subsequently to place additional assets in the segregated account in order to ensure that the value of the account remains equal to the amount of the Fund's commitment. It may be expected that a Fund's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. In addition, because the Fund will set aside cash or liquid portfolio securities to satisfy its purchase commitments in the manner described above, the Fund's liquidity and the ability of the Fund's adviser to manage it might be affected in the event its commitments to purchase "when-issued" securities ever exceed 25% of the value of its total assets. Under normal market conditions, however, a Fund's commitment to purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of the value of its total assets. When a Fund engages in when-issued or delayed-delivery transactions, it relies on the other party to consummate the trade. Failure of the seller to do so may result in the Fund incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
Indexed Securities
Each Fund may invest in securities whose potential return is based on the change in particular measurements of value or rates (an "index"). As an illustration, the Fund may invest in a debt security that pays interest and returns principal based on the change in the value of a securities index or a basket of securities. If the Fund invests in such securities, it may be subject to reduced or eliminated interest payments or loss of principal in the event of an adverse movement in the relevant index.
Lending Portfolio Securities
Each Fund may lend its portfolio securities to brokers, dealers and other financial institutions, provided it receives collateral, with respect to each loan of U.S. securities, equal to at least 102% of the value of the portfolio securities loaned, and, with respect to each loan of non-U.S. securities, collateral of at least 105% of the value of the portfolio securities loaned, and at all times thereafter shall require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities so loaned. By lending its portfolio securities, a Fund can increase its income through the investment of the collateral. For the purposes of this policy, the Funds consider collateral consisting of cash, U.S. government securities or letters of credit issued by banks whose securities meet the standards for investment by the Funds to be the equivalent of cash. From time to time, a Fund may return to the borrower or a third party which is unaffiliated with it, and which is acting as a "placing broker," a part of the interest earned from the investment of collateral received for securities loaned.
The SEC currently requires that the following conditions must be met
whenever portfolio securities are loaned: (1) a Fund must receive from the
borrower collateral equal to at least 100% of the value of the portfolio
securities loaned; (2) the borrower must increase such collateral whenever the
market value of the securities loaned rises above the level of such collateral;
(3) a Fund must be able to terminate the loan at any time; (4) a Fund must
receive reasonable interest on the loan, as well as any dividends, interest or
other distributions payable on the loaned securities, and any increase in market
value; (5) a Fund may pay only reasonable custodian fees in connection with the
loan; and (6) while any voting rights on the loaned securities may pass to the
borrower, a Fund's Board of Trustees must be able to terminate the loan and
regain the right to vote the securities if a material event adversely affecting
the investment occurs. These conditions may be subject to future modification.
Loan agreements involve certain risks in the event of default or insolvency of
the other party including possible delays or restrictions upon the Fund's
ability to recover the loaned securities or dispose of the collateral for the
loan.
Investment of Securities Lending Collateral . The collateral received from a borrower as a result of a Fund's securities lending activities will be used to purchase both fixed-income securities and other securities with debt-like characteristics that are rated A1 or P1 on a fixed rate or floating rate basis, including: bank obligations; commercial paper; investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company; loan participations; master notes; medium term notes; repurchase agreements; and U.S. government securities. Except for the investment agreements, funding agreements or guaranteed investment contracts guaranteed by an insurance company, master notes, and medium term notes (which are described below), these types of investments are described elsewhere in this SAI. Collateral may also be invested in a money market mutual fund or short-term collective investment trust.
Investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company are agreements where an insurance company either provides for the investment of a Fund's assets or provides for a minimum guaranteed rate of return to the investor.
Master notes are promissory notes issued usually with large, creditworthy broker-dealers on either a fixed rate or floating rate basis. Master notes may or may not be collateralized by underlying securities. If the master note is issued by an unrated subsidiary of a broker-dealer, then an unconditional guarantee is provided by the issuer's parent.
Medium term notes are unsecured, continuously offered corporate debt obligations. Although medium term notes may be offered with a maturity from one to ten years, in the context of securities lending collateral, the maturity of the medium term note will not generally exceed two years.
Real Estate Investment Trusts
Although the Funds will not invest in real estate directly, the Funds may invest in securities of real estate investment trusts ("REITs") and other real estate industry companies or companies with substantial real estate investments and, as a result, the Funds may be subject to certain risks associated with direct ownership of real estate and with the real estate industry in general. These risks include, among others: possible declines in the value of real estate; possible lack of availability of mortgage funds; extended vacancies of properties; risks related to general and local economic conditions; overbuilding; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates.
REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs. REITs are not taxed on income distributed to shareholders provided they comply with several requirements of Internal Revenue Code of 1986, as amended (the "Code").
Convertible Securities
Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into or exchanged for a specified amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. Convertible securities have general characteristics similar to both debt obligations and equity securities. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, the credit standing of the issuer and other factors. The market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. The conversion value of a convertible security is determined by the market price of the underlying common stock. The market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock and therefore will react to variations in the general market for equity securities. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer.
A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. Most convertible securities currently are issued by U.S. companies, although a substantial Eurodollar convertible securities market has developed, and the markets for convertible securities denominated in local currencies are increasing.
A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. If a convertible security held by a Fund is called for redemption, the
Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock, or sell it to a third party.
Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, generally enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock of the same issuer. Because of the subordination feature, however, some convertible securities typically are rated below investment grade or are not rated, depending on the general creditworthiness of the issuer.
The Gartmore Market Neutral Fund may also invest in zero coupon convertible securities. Zero coupon convertible securities are debt securities which are issued at a discount to their face amount and do not entitle the holder to any periodic payments of interest prior to maturity. Rather, interest earned on zero coupon convertible securities accretes at a stated yield until the security reaches its face amount at maturity. Zero coupon convertible securities are convertible into a specific number of shares of the issuer's common stock. In addition, zero coupon convertible securities usually have put features that provide the holder with the opportunity to sell the securities back to the issuer at a stated price before maturity. Generally, the prices of zero coupon convertible securities may be more sensitive to market interest rate fluctuations then conventional convertible securities. For more information about zero coupon securities generally, see "Zero Coupon Securities, Pay-In-Kind Bonds ("PIK Bonds") and Deferred Payment Securities" above.
Warrants
Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance), on a specified date, during a specified period, or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants acquired by a Fund in units or attached to securities are not subject to these restrictions. Warrants do not carry with them the right to dividends or voting rights with respect to the securities that they entitle their holder to purchase, and they do not represent any rights in the assets of the issuer. As a result, warrants may be considered more speculative than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date.
Preferred Stock
Preferred stocks, like some debt obligations, are generally fixed-income securities. Shareholders of preferred stocks normally have the right to receive dividends at a fixed rate when and as declared by the issuer's board of directors, but do not participate in other amounts available for distribution by the issuing corporation. Dividends on the preferred stock may be cumulative, and all cumulative dividends usually must be paid prior to shareholders of common stock receiving any dividends. Because preferred stock dividends must be paid before common stock dividends, preferred stocks generally entail less risk than common stocks. Upon liquidation, preferred stocks are entitled to a specified liquidation preference, which is generally the same as the par or stated value, and are senior in right of payment to common stock. Preferred stocks are, however, equity securities in the sense that they do not represent a liability of the issuer and, therefore, do not offer as great a degree of protection of capital or assurance of continued income as investments in corporate debt securities. Preferred stocks generally are subordinated in right of payment to all debt obligations and creditors of the issuer, and convertible preferred stocks may be subordinated to other preferred stock of the same issuer.
Short Selling of Securities
In a short sale of securities, a Fund sells stock which it does not own, making delivery with securities "borrowed" from a broker. The Fund is then obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. This price may or may not be less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay the lender any dividends or interest which accrue during the period of the loan. In order to borrow the security, the Fund may also have to pay a
premium and/or interest which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. In addition, the broker may require the deposit of collateral (generally, up to 50% of the value of the securities sold short).
A Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those two dates. The amount of any gain will be decreased and the amount of any loss will be increased by any premium or interest the Fund may be required to pay in connection with the short sale. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security. However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction. Whether a Fund will be successful in utilizing a short sale will depend, in part, on the ability of the Fund's adviser to predict correctly whether the price of a security it borrows to sell short will decrease.
In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. A Fund must segregate or earmark an amount of cash or other liquid assets equal to the difference between (a) the market value of securities sold short at the time that they were sold short and (b) the value of the collateral deposited with the broker to meet margin requirements in connection with the short sale (not including the proceeds from the short sale). While the short position is open, the Fund must maintain on a daily basis segregated or earmarked liquid assets at such a level that the amount segregated or earmarked plus the amount of collateral deposited with the broker as margin equals the current market value of the securities sold short.
Each Fund also may engage in short sales, if at the time of the short sale the Fund owns or has the right to obtain without additional cost an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." The Funds do not intend to engage in short sales against the box for investment purposes. A Fund may, however, make a short sale as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund (or a security convertible or exchangeable for such security), or when a Fund wants to sell the security at an attractive current price. In such a case, any future losses in the Fund's long position should be offset by a gain in the short position and, conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns. There will be certain additional transaction costs associated with short sales against the box. For tax purposes, a Fund that enters into a short sale "against the box" may be treated as having made a constructive sale of an "appreciated financial position," causing the Fund to realize gain, but not loss.
Restricted, Non-Publicly Traded and Illiquid Securities
Each Fund may not invest more than 15% of its net assets, in the aggregate, in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits maturing in more than seven days and securities that are illiquid because of the absence of a readily available market or legal or contractual restrictions on resale or other factors limiting the marketability of the security. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Unless subsequently registered for sale, these securities can only be sold in privately negotiated transactions or pursuant to an exemption from registration. The Funds typically do not hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities, and a Fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A Fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
The SEC has adopted Rule 144A which allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers.
Any such restricted securities will be considered to be illiquid for purposes of a Fund's limitations on investments in illiquid securities unless, pursuant to procedures adopted by the Board of Trustees of the Trust, the Funds' adviser has determined such securities to be liquid because such securities are eligible for resale pursuant to Rule 144A and are readily saleable. To the extent that qualified institutional buyers may become uninterested in purchasing Rule 144A securities, the Fund's level of illiquidity may increase.
The Funds may sell over-the-counter ("OTC") options and, in connection therewith, segregate assets or cover its obligations with respect to OTC options written by the Fund. The assets used as cover for OTC options written by a Fund will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Fund may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC option written subject to this procedure would be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option.
The Funds' adviser will monitor the liquidity of restricted securities in the portion of a Fund it manages. In reaching liquidity decisions, the following factors are considered: (1) the unregistered nature of the security; (2) the frequency of trades and quotes for the security; (3) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (4) dealer undertakings to make a market in the security and (5) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer).
Borrowing
The Funds may borrow money from banks, limited by each Fund's fundamental investment restriction (generally, 33-1/3% of its total assets (including the amount borrowed)), including borrowings for temporary or emergency purposes. The Funds may engage in mortgage dollar roll and reverse repurchase agreements which may be considered a form of borrowing, unless the Fund covers its exposure by segregating or earmarking liquid assets.
Derivative Instruments
The Funds' adviser may use a variety of derivative instruments, including options, futures contracts (sometimes referred to as "futures"), options on futures contracts, stock index options, forward contracts, swaps and structured contracts, to hedge a Fund's portfolio, for risk management, for obtaining exposure to a particular security or group of securities without actually purchasing such security or group of securities, or for any other permissible purposes consistent with the Fund's investment objective. Derivative instruments are securities or agreements with their values based on the value of some underlying asset (e.g., a security, currency or index) or the level of a reference index.
Derivatives generally have investment characteristics that are based upon either forward contracts (under which one party is obligated to buy and the other party is obligated to sell an underlying asset at a specific price on a specified date) or option contracts (under which the holder of the option has the right but not the obligation to buy or
sell an underlying asset at a specified price on or before a specified date). Consequently, the change in value of a forward-based derivative generally is roughly proportional to the change in value of the underlying asset. In contrast, the buyer of an option-based derivative generally will benefit from favorable movements in the price of the underlying asset but is not exposed to the corresponding losses that result from adverse movements in the value of the underlying asset. The seller (writer) of an option-based derivative generally will receive fees or premiums but generally is exposed to losses resulting from changes in the value of the underlying asset. Derivative transactions may include elements of leverage and, accordingly, the fluctuation of the value of the derivative transaction in relation to the underlying asset may be magnified.
The use of these instruments is subject to applicable regulations of the SEC, the several options and futures exchanges upon which they may be traded, and the Commodity Futures Trading Commission ("CFTC").
Special Risks of Derivative Instruments. The use of derivative instruments involves special considerations and risks as described below. Risks pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the Funds' adviser's ability to predict movements of the overall securities and currency markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation, between price movements of an instrument and price movements of investments being hedged. For example, if the value of an instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be fully successful. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. The effectiveness of hedges using instruments on indices will depend on the degree of correlation between price movements in the index and price movements in the investments being hedged, as well as, how similar the index is to the portion of the Fund's assets being hedged in terms of securities composition.
(3) Hedging strategies, if successful, can reduce the risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments. For example, if a Fund entered into a short hedge because the Funds' adviser projected a decline in the price of a security in the Fund's portfolio, and the price of that security increased instead, the gain from that increase might be wholly or partially offset by a decline in the price of the instrument. Moreover, if the price of the instrument declined by more than the increase in the price of the security, a Fund could suffer a loss.
(4) As described below, a Fund might be required to maintain assets as "cover," maintain segregated accounts, or make margin payments when it takes positions in these instruments involving obligations to third parties (i.e., instruments other than purchased options). If the Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time. The Fund's ability to close out a position in an instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction ("counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any hedging position can be closed out at a time and price that is favorable to the Fund.
For a discussion of the federal income tax treatment of a Fund's derivative instruments, see "Additional General Tax Information For the Funds" below.
Options. Each Fund may purchase or write put and call options on securities and indices, and may purchase options on foreign currencies, and enter into closing transactions with respect to such options to terminate an existing position. The purchase of call options serves as a long hedge, and the purchase of put options serves as a short hedge. Writing put or call options can enable a Fund to enhance income by reason of the premiums paid by the
purchaser of such options. Writing call options serves as a limited short hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security appreciates to a price higher than the exercise price of the call option, it can be expected that the option will be exercised, and the Fund will be obligated to sell the security at less than its market value or will be obligated to purchase the security at a price greater than that at which the security must be sold under the option. All or a portion of any assets used as cover for OTC options written by a Fund would be considered illiquid to the extent described under "Restricted, Non-Publicly Traded and Illiquid Securities" above. Writing put options serves as a limited long hedge because increases in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security depreciates to a price lower than the exercise price of the put option, it can be expected that the put option will be exercised, and the Fund will be obligated to purchase the security at more than its market value.
The value of an option position will reflect, among other things, the historical price volatility of the underlying investment, the current market value of the underlying investment, the time remaining until expiration of the option, the relationship of the exercise price to the market price of the underlying investment, and general market conditions. Options that expire unexercised have no value. Options used by the Funds may include European-style options, which can only be exercised at expiration. This is in contrast to American-style options which can be exercised at any time prior to the expiration date of the option.
Each Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, a Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, a Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Fund to realize the profit or limit the loss on an option position prior to its exercise or expiration.
Each Fund may purchase or write both OTC options and options traded on foreign and U.S. exchanges. Exchange-traded options are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded option transaction. OTC options are contracts between the Fund and the counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when the Fund purchases or writes an OTC option, it relies on the counterparty to make or take delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premium paid by the Fund as well as the loss of any expected benefit of the transaction.
A Fund's ability to establish and close out positions in exchange-listed options depends on the existence of a liquid market. The Funds intend to purchase or write only those exchange-traded options for which there appears to be a liquid secondary market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. Although each Fund will enter into OTC options only with counterparties that are expected to be capable of entering into closing transactions with the Fund, there is no assurance that such Fund will in fact be able to close out an OTC option at a favorable price prior to expiration. In the event of insolvency of the counterparty, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
If a Fund is unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by a Fund could cause material losses because the Fund would be unable to sell the investment used as a cover for the written option until the option expires or is exercised.
The Funds may engage in options transactions on indices in much the same manner as the options on securities discussed above, except that index options may serve as a hedge against overall fluctuations in the securities markets in general.
The writing and purchasing of options is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Imperfect correlation between the options and securities markets may detract from the effectiveness of attempted hedging.
Transactions using OTC options (other than purchased options) expose a Fund to counterparty risk. To the extent required by SEC guidelines, a Fund will not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities, other options, or futures or (2) cash and liquid obligations with a value sufficient at all times to cover its potential obligations to the extent not covered as provided in (1) above. A Fund will also set aside cash and/or appropriate liquid assets in a segregated custodial account if required to do so by the SEC and CFTC regulations. Assets used as cover or held in a segregated account cannot be sold while the position in the corresponding option or futures contract is open, unless they are replaced with similar assets. As a result, the commitment of a large portion of the Fund's assets to segregated accounts as a cover could impede portfolio management or the Fund's ability to meet redemption requests or other current obligations.
Spread Transactions. A Fund may purchase covered spread options from securities dealers. Such covered spread options are not presently exchange-listed or exchange-traded. The purchase of a spread option gives a Fund the right to put, or sell, a security that it owns at a fixed dollar spread or fixed yield spread in relationship to another security that the Fund does not own, but which is used as a benchmark. The risk to a Fund in purchasing covered spread options is the cost of the premium paid for the spread option and any transaction costs. In addition, there is no assurance that closing transactions will be available. The purchase of spread options will be used to protect a Fund against adverse changes in prevailing credit quality spreads ( i.e., the yield spread between high quality and lower quality securities). Such protection is only provided during the life of the spread option.
Futures Contracts. The Funds may enter into futures contracts, including interest rate, index, and currency futures and purchase and write (sell) related options. The purchase of futures or call options thereon can serve as a long hedge, and the sale of futures or the purchase of put options thereon can serve as a short hedge. Writing covered call options on futures contracts can serve as a limited short hedge, and writing covered put options on futures contracts can serve as a limited long hedge, using a strategy similar to that used for writing covered options in securities. A Fund's hedging may include purchases of futures as an offset against the effect of expected increases in securities prices or currency exchange rates and sales of futures as an offset against the effect of expected declines in securities prices or currency exchange rates. A Fund may write put options on futures contracts while at the same time purchasing call options on the same futures contracts in order to create synthetically a long futures contract position. Such options would have the same strike prices and expiration dates. A Fund will engage in this strategy only when the Funds' adviser believes it is more advantageous to a Fund than purchasing the futures contract.
To the extent required by regulatory authorities, the Funds will only enter into futures contracts that are traded on U.S. or foreign exchanges or boards of trade approved by the CFTC and are standardized as to maturity date and underlying financial instrument. These transactions may be entered into for "bona fide hedging" purposes as defined in CFTC regulations and other permissible purposes including increasing return and hedging against changes in the value of portfolio securities due to anticipated changes in interest rates, currency values and/or market conditions.
The Funds will not enter into futures contracts and related options for other than "bona fide hedging" purposes for which the aggregate initial margin and premiums required to establish positions exceed 5% of a Fund's net asset value after taking into account unrealized profits and unrealized losses on any such contracts it has entered into. There is no overall limit on the percentage of a Fund's assets that may be at risk with respect to futures activities. Although techniques other than sales and purchases of futures contracts could be used to reduce a Fund's exposure to market, currency, or interest rate fluctuations, such Fund may be able to hedge its exposure more effectively and perhaps at a lower cost through using futures contracts.
A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument (e.g., debt security) or currency for a specified price at a designated date, time, and place. An index futures contract is an agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified multiplier times the difference between the value of the index at the close of the last trading day of the contract and the price at which the index futures contract was originally written. Transaction costs are incurred when a futures contract is bought or sold and margin deposits must be maintained. A futures contract may be satisfied by delivery or purchase, as the case may be, of the instrument, or the currency, or by payment of the change in the cash value of the index. More commonly, futures contracts are closed out prior to delivery by entering into an offsetting transaction in a matching futures contract. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of those securities is
made. If the offsetting purchase price is less than the original sale price, a Fund realizes a gain; if it is more, a Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, a Fund realizes a gain; if it is less, a Fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If a Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain the margin deposits on the futures contract.
No price is paid by a Fund upon entering into a futures contract. Instead, at the inception of a futures contract, the Fund is required to deposit in a segregated account with its custodian, in the name of the futures broker through whom the transaction was effected, an "initial margin" consisting of cash, U.S. government securities or other liquid obligations, in an amount generally equal to 10% or less of the contract value. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Unlike margin in securities transactions, initial margin on futures contracts does not represent a borrowing, but rather is in the nature of a performance bond or good-faith deposit that is returned to a Fund at the termination of the transaction if all contractual obligations have been satisfied. Under certain circumstances, such as periods of high volatility, a Fund may be required by an exchange to increase the level of its initial margin payment, and initial margin requirements might be increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures broker daily as the value of the futures position varies, a process known as "marking to market." Variation margin does not involve borrowing, but rather represents a daily settlement of a Fund's obligations to or from a futures broker. When a Fund purchases an option on a future, the premium paid plus transaction costs is all that is at risk. In contrast, when a Fund purchases or sells a futures contract or writes a call or put option thereon, it is subject to daily variation margin calls that could be substantial in the event of adverse price movements. If a Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous. Purchasers and sellers of futures positions and options on futures can enter into offsetting closing transactions by selling or purchasing, respectively, an instrument identical to the instrument held or written. Positions in futures and options on futures may be closed only on an exchange or board of trade on which they were entered into (or through a linked exchange). Although the Funds intend to enter into futures transactions only on exchanges or boards of trade where there appears to be an active market, there can be no assurance that such a market will exist for a particular contract at a particular time.
Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a future or option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.
If a Fund were unable to liquidate a futures or option on a futures contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses, because it would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the futures market might increase the risk that movements in the prices of futures contracts or options on futures contracts might not correlate perfectly with movements in the prices of the investments being hedged. For example, all participants in the futures and options on futures contracts markets are subject to daily variation margin calls and might be compelled to liquidate futures or options on futures contracts positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, because initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the future markets. This participation also might cause temporary price distortions. In addition, activities of large traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions.
Swap Agreements. Each Fund may enter into interest rate, securities index, commodity, or security and currency exchange rate swap agreements for any lawful purpose consistent with the Fund's investment objective, such as for the purpose of attempting to obtain or preserve a particular desired return or spread at a lower cost to the Fund than if the it had invested directly in an instrument that yielded that desired return or spread. A Fund also may enter into swaps in order to protect against an increase in the price of, or the currency exchange rate applicable to, securities that the Fund anticipates purchasing at a later date. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from one or more days to several years. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," (i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency) or in a "basket" of securities representing a particular index. Swap agreements may include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. "Total return swaps" are contracts in which one party agrees to make payments of the total return from the underlying asset during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another underlying asset.
The "notional amount" of the swap agreement is the agreed upon basis for calculating the obligations that the parties to a swap agreement have agreed to exchange. Under most swap agreements entered into by the Fund, the obligations of the parties would be exchanged on a "net basis." Consequently, the Fund's obligation (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). The Fund's obligation under a swap agreement will be accrued daily (offset against amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of cash or liquid assets.
Whether a Fund's use of swap agreements will be successful in furthering its investment objective will depend, in part, on the ability of the Fund's adviser to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Swap agreements may be considered to be illiquid. Moreover, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The swaps market is largely unregulated.
The Fund will enter swap agreements only with counterparties that the Fund's adviser reasonably believes are capable of performing under the swap agreements. If there is a default by the other party to such a transaction, the Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction.
Foreign Currency-Related Derivative Strategies - Special Considerations. A Fund may use options and futures and options on futures on foreign currencies and forward currency contracts to hedge against movements in the values of the foreign currencies in which a Fund's securities are denominated. A Fund may engage in currency exchange transactions to protect against uncertainty in the level of future exchange rates and may also engage in currency transactions to increase income and total return. Such currency hedges can protect against price movements in a security the Fund owns or intends to acquire that are attributable to changes in the value of the currency in which it is denominated. Such hedges do not, however, protect against price movements in the securities that are attributable to other causes.
A Fund might seek to hedge against changes in the value of a particular currency when no hedging instruments on that currency are available or such hedging instruments are more expensive than certain other hedging instruments. In such cases, a Fund may hedge against price movements in that currency by entering into transactions using hedging instruments on another foreign currency or a basket of currencies, the values of which a subadviser believes will have a high degree of positive correlation to the value of the currency being hedged. The risk that movements in the price of the hedging instrument will not correlate perfectly with movements in the price of the currency being hedged is magnified when this strategy is used.
The value of derivative instruments on foreign currencies depends on the value of the underlying currency relative to the U.S. dollar. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such hedging instruments, a Fund could be disadvantaged by having to deal in the odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies or any regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Quotation information generally is representative of very large transactions in the interbank market and thus might not reflect odd-lot transactions where rates might be less favorable. The interbank market in foreign currencies is a global, round-the-clock market. To the extent the U.S. options or futures markets are closed while the markets for the underlying currencies remain open, significant price and rate movements might take place in the underlying markets that cannot be reflected in the markets for the derivative instruments until they reopen.
Settlement of derivative transactions involving foreign currencies might be required to take place within the country issuing the underlying currency. Thus, a Fund might be required to accept or make delivery of the underlying foreign currency in accordance with any U.S. or foreign regulations regarding the maintenance of foreign banking arrangements by U.S. residents and might be required to pay any fees, taxes and charges associated with such delivery assessed in the issuing country.
Permissible foreign currency options will include options traded primarily in the OTC market. Although options on foreign currencies are traded primarily in the OTC market, a Fund will normally purchase OTC options on foreign currency only when a Fund's adviser or subadviser believes a liquid secondary market will exist for a particular option at any specific time.
Forward Currency Contracts
A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers.
At or before the maturity of a forward currency contract, each Fund may either sell a portfolio security and make delivery of the currency, or retain the security and fully or partially offset its contractual obligation to deliver the currency by purchasing a second contract. If the Funds retain the portfolio security and engage in an offsetting transaction, the Fund, at the time of execution of the offsetting transaction, will incur a gain or a loss to the extent that movement has occurred in forward currency contract prices.
The precise matching of forward currency contract amounts and the value of the securities involved generally will not be possible because the value of such securities, measured in the foreign currency, will change after the foreign currency contract has been established. Thus, the Funds might need to purchase or sell foreign currencies in the spot (cash) market to the extent such foreign currencies are not covered by forward currency contracts. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain.
Currency Hedging. While the values of forward currency contracts, currency options, currency futures and options on futures may be expected to correlate with exchange rates, they will not reflect other factors that may affect the value of the Funds' investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect the Funds against price decline if the issuer's creditworthiness deteriorates. Because the value of the Funds' investments denominated in foreign currency will change in response to many factors other than exchange rates, a currency hedge may not be entirely successful in mitigating changes in the value of the Funds' investments denominated in that currency over time.
A decline in the dollar value of a foreign currency in which a Fund's securities are denominated will reduce the dollar value of the securities, even if their value in the foreign currency remains constant. The use of
currency hedges does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In order to protect against such diminutions in the value of securities it holds, each Fund may purchase put options on the foreign currency. If the value of the currency does decline, a Fund will have the right to sell the currency for a fixed amount in dollars and thereby will offset, in whole or in part, the adverse effect on its securities that otherwise would have resulted. Conversely, if a rise in the dollar value of a currency in which securities to be acquired is denominated is projected, thereby potentially increasing the cost of the securities, the Funds may purchase call options on the particular currency. The purchase of these options could offset, at least partially, the effects of the adverse movements in exchange rates. Although currency hedges limit the risk of loss due to a decline in the value of a hedged currency, at the same time, they also limit any potential gain that might result should the value of the currency increase.
Each Fund may enter into foreign currency exchange transactions to hedge its currency exposure in specific transactions or portfolio positions. Transaction hedging is the purchase or sale of forward currency with respect to specific receivables or payables of the Fund generally accruing in connection with the purchase or sale of its portfolio securities. Position hedging is the sale of forward currency with respect to portfolio security positions. A Fund may not position hedge to an extent greater than the aggregate market value (at the time of making such sale) of the hedged securities.
Securities of Investment Companies
To the extent permitted by the 1940 Act, each Fund may generally invest up to 10% of its total assets, calculated at the time of investment, in the securities of other investment companies. No more than 5% of a Fund's total assets may be invested in the securities of any one investment company nor may it acquire more than 3% of the voting securities of any other investment company. Each Fund indirectly will bear its proportionate share of any management fees paid by an investment company in which it invests in addition to the advisory fee paid by the Fund. Some of the countries in which a Fund may invest may not permit direct investment by outside investors. Investments in such countries may only be permitted through foreign government-approved or government-authorized investment vehicles, which may include other investment companies.
SPDRs and other Exchange Traded Funds. Each Fund may invest in Standard & Poor's Depositary Receipts ("SPDRs") and in shares of other exchange traded funds (collectively, "ETFs"). SPDRs are interests in unit investment trusts. Such investment trusts invest in a securities portfolio that includes substantially all of the common stocks (in substantially the same weights) as the common stocks included in a particular Standard & Poor's ("S&P") Index such as the S&P 500 Index. SPDRs are traded on the American Stock Exchange, but may not be redeemed. The results of SPDRs will not match the performance of the designated S&P Index due to reductions in the SPDRs' performance attributable to transaction and other expenses, including fees paid by the SPDR to service providers. SPDRs distribute dividends on a quarterly basis.
ETFs, including SPDRs, are not actively managed. Rather, an ETF's objective is to track the performance of a specified index. Therefore, securities may be purchased, retained and sold by ETFs at times when an actively managed trust would not do so. As a result, you can expect greater risk of loss (and a correspondingly greater prospect of gain) from changes in the value of the securities that are heavily weighted in the index than would be the case if the ETF was not fully invested in such securities. Because of this, an ETF's price can be volatile, and a Fund may sustain sudden, and sometimes substantial, fluctuations in the value of its investment in such ETF.
Temporary Investments
Generally each of the Funds will be fully invested in accordance with its investment objective and strategies. However, pending investment of cash balances or for other cash management purposes, or if a Fund's adviser believes that business, economic, political or financial conditions warrant, a Fund, may invest without limit in cash or money market cash equivalents, including: (1) short-term U.S. government securities; (2) certificates of deposit, bankers' acceptances, and interest-bearing savings deposits of commercial banks; (3) prime quality commercial paper; (4) repurchase agreements covering any of the securities in which the Fund may invest directly; and (5) subject to the limits of the 1940 Act, shares of other investment companies that invest in securities in which
the Fund may invest. Should this occur, a Fund will not be pursuing its investment objective and may miss potential market upswings.
Portfolio Turnover
The portfolio turnover rate for the Funds is calculated by dividing the lesser of purchases or sales of portfolio securities for the year by the monthly average value of the portfolio securities, excluding securities whose maturities at the time of purchase were one year or less. High portfolio turnover rates will generally result in higher brokerage expenses, and may increase the volatility of the Funds. For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, the portfolio turnover rate for each Fund was 0%.
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions of each Fund which cannot be changed without the vote of the majority of the outstanding shares of the Fund for which a change is proposed. The vote of the majority of the outstanding shares means the vote of (1) 67% or more of the voting securities present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy or (2) a majority of the outstanding voting securities, whichever is less.
Each of the Funds:
o May not purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, if, immediately after such purchase, more than 5% of the Fund's total assets would be invested in such issuer or the Fund would hold more than 10% of the outstanding voting securities of the issuer, except that 25% or less of the Fund's total assets may be invested without regard to such limitations. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.
o May not borrow money or issue senior securities, except that each Fund may sell securities short, enter into reverse repurchase agreements and may otherwise borrow money and issue senior securities as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not act as an underwriter of another issuer's securities, except to the extent that the Fund may be deemed an underwriter within the meaning of the Securities Act in connection with the purchase and sale of portfolio securities.
o May not purchase or sell commodities or commodities contracts, except to the extent disclosed in the current Prospectus or SAI of the Fund.
o May not purchase the securities of any issuer if, as a result, 25% or more (taken at current value) of the Fund's total assets would be invested in the securities of issuers, the principal activities of which are in the same industry (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities or securities of other investment companies). This limitation does not apply to securities issued by the U.S. government or its agencies or instrumentalities and obligations issued by state, county or municipal governments. The following industries are considered separate industries for purposes of this investment restriction: electric, natural gas distribution, natural gas pipeline, combined electric and natural gas, telephone utilities, captive borrowing conduit, equipment finance, premium finance, leasing finance, consumer finance and other finance.
o May not lend any security or make any other loan, except that each Fund may in accordance with its investment objective and policies (i) lend portfolio securities; (ii) purchase and hold debt securities or other debt instruments, including but not limited to loan participations and subparticipations, assignments, and structured securities; (iii) make loans secured by mortgages on real property; (iv) enter into repurchase agreements; and (v) make time deposits with financial institutions and invest in instruments issued by financial institutions, and enter into any other lending arrangement as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not purchase or sell real estate, except that each Fund may (i) acquire real estate through ownership of securities or instruments and sell any real estate acquired thereby, (ii) purchase or sell instruments secured by real estate (including interests therein), and (iii) purchase or sell securities issued by entities or investment vehicles that own or deal in real estate (including interests therein).
The following are the non-fundamental operating policies of the Funds which may be changed by the Board of Trustees of the Trust without shareholder approval:
Each Fund may not:
o purchase securities on margin, except that the Funds may use margin to the extent necessary to engage in short sales of securities and to obtain such short-term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with options, futures contracts, options on futures contracts and transactions in currencies or other derivative instruments shall not constitute purchasing securities on margin.
o purchase or otherwise acquire any security if, as a result, more than 15% of its net assets would be invested in securities that are illiquid.
o purchase securities of other investment companies except (a) in connection with a merger, consolidation, acquisition, reorganization or offer of exchange, or (b) to the extent permitted by the 1940 Act or any rules or regulations thereunder or pursuant to any exemptions therefrom.
The Gartmore Small Cap Core Fund may not:
o pledge, mortgage or hypothecate any assets owned by the Fund in excess of 33-1/3% of the Fund's total assets at the time of such pledging, mortgaging or hypothecating.
If any percentage restriction or requirement described above is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in NAV will not constitute a violation of such restriction or requirement. However, should a change in NAV or other external events cause a Fund's investments in illiquid securities including repurchase agreements with maturities in excess of seven days, to exceed the limit set forth above for such Fund's investment in illiquid securities, a Fund will act to cause the aggregate amount such securities to come within such limit as soon as reasonably practicable. In such event, however, such Fund would not be required to liquidate any portfolio securities where a Fund would suffer a loss on the sale of such securities.
INTERNAL REVENUE CODE RESTRICTIONS
In addition to the investment restrictions above, each Fund must be
diversified according to Code requirements. Specifically, at each tax quarter
end, each Fund's holdings must be diversified so that (a) at least 50% of the
market value of its total assets is represented by cash, cash items (including
receivables), U.S. government securities, securities of other U.S. regulated
investment companies, and other securities, limited so that no one issuer has a
value greater than 5% of the value of the Fund's total assets and that the Fund
holds no more than 10% of the outstanding voting securities of such issuer, and
(b) not more than 25% of the value of the Fund's assets is invested in the
securities (other than those of the U.S. government or other U.S. regulated
investment companies) of any one issuer or of two or more issuers which the Fund
controls and which are engaged in the same, similar, or related trades or
businesses.
The investment objectives of the Funds are not fundamental and may be changed by the Board of Trustees without shareholder approval.
DISCLOSURE OF PORTFOLIO HOLDINGS
The Board of Trustees of the Trust has adopted policies and procedures regarding the disclosure of portfolio holdings information to protect the interests of Fund shareholders and to address potential conflicts of interest that could arise between the interests of Fund shareholders and the interests of the Funds' investment advisers, principal underwriter or affiliated persons of the Funds' investment advisers or principal underwriter. The Trust's overall policy with respect to the release of portfolio holdings is to release such information consistent with applicable legal requirements and the fiduciary duties owed to shareholders. Subject to the limited exceptions described below, the Trust will not make available to anyone non-public information with respect to its portfolio holdings until such time as the information is made available to all shareholders or the general public.
The policies and procedures are applicable to the Funds' respective investment advisers and any subadviser to the Funds. Pursuant to the policy, the Funds, their investment advisers, any subadviser, and their agents are obligated to:
o Act in the best interests of Fund shareholders by protecting non-public and potentially material portfolio holdings information;
o Ensure that portfolio holdings information is not provided to a favored group of clients or potential clients; and
o Adopt such safeguards and controls around the release of client information so that no client or group of clients is unfairly disadvantaged as a result of such release.
Portfolio holdings information that is not publicly available will be released selectively only pursuant to the exceptions described below. In most cases, where an exception applies, the release of portfolio holdings is strictly prohibited until the information is at least 15 calendar days old. Nevertheless, the adviser's Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate may authorize, where circumstances dictate, the release of more current portfolio holdings information.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC. The Funds disclose their complete portfolio holdings information to the SEC using Form N-Q within 60 days of the end of the first and third quarter ends of the Funds' fiscal year and on Form N-CSR on the second and fourth quarter ends of the Funds' fiscal year. Form N-Q is not required to be mailed to shareholders, but is made public through the SEC's electronic filings. Shareholders receive either complete portfolio holdings information or summaries of Fund portfolio holdings with their annual and semi-annual reports.
Exceptions to the portfolio holdings release policy described above can only be authorized by the adviser's Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate and will be made only when:
o A Fund has a legitimate business purpose for releasing portfolio holdings information in advance of release to all shareholders or the general public;
o The recipient of the information provides written assurances that the non-public portfolio holdings information will remain confidential and that persons with access to the information will be prohibited from trading based on the information; and
o The release of such information would not otherwise violate the antifraud provisions of the federal securities laws or the Funds' fiduciary duties.
Under this policy, the receipt of compensation by a Fund, an investment adviser, a subadviser, or an affiliate as consideration for disclosing non-public portfolio holdings information will not be deemed a legitimate business purpose.
Eligible third parties to whom portfolio holdings information may be released in advance of general release include the following:
o Data consolidators (including ratings agencies);
o Fund rating/ranking services and other data providers; and
o Service providers to the Funds.
The Funds' investment advisers conduct periodic reviews of compliance with the policy and the Funds' Chief Compliance Officer provides annually a report to the Board of Trustees regarding the operation of the policy and any material changes recommended as a result of such review. The investment adviser's compliance staff will also annually submit to the Board a list of exceptions granted to the policy, including an explanation of the legitimate business purpose of the Fund that was served as a result of the exception.
TRUSTEES AND OFFICERS OF THE TRUST
Management Information
Trustees who are not Interested Persons (as defined in the 1940 Act) of the Trust.
=============================================================================================================
(1) (2) (3) (4) (5)
=============================================================================================================
Number of
Position(s) Portfolios in
Held with Fund
Fund and Complex
Name, Address, and Length of Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served* During Past 5 Years Trustee Held by Trustee**
=============================================================================================================
Charles E. Allen Trustee since Mr. Allen is Chairman, Chief 89 None
July 2000 Executive Officer and
c/o NWD Investment President of Graimark Realty
Management, Inc. Advisors, Inc. (real estate
development, investment and
1200 River Road, asset management).
Suite 1000,
Conshohocken, PA 19428
1948
=============================================================================================================
Paula H.J. Cholmondeley Trustee since Ms. Cholmondeley was Vice 89 Director of Dentsply
July 2000 President and General International, Inc.
c/o NWD Investment Manager Sappi Fine Paper (dental products),
Management, Inc. North America from April Ultralife Batteries,
1200 River Road, 2000 through December 2003. Inc., Albany
Suite 1000, International Corp.
Conshohocken, PA 19428 (paper industry),
Terex Corporation
1947 (construction
equipment), and
Minerals Technology
Inc. (specialty
chemicals)
=============================================================================================================
C. Brent DeVore*** Trustee since Dr. DeVore is President of 89 None
1990 Otterbein College.
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1940
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|
=============================================================================================================
(1) (2) (3) (4) (5)
=============================================================================================================
Number of
Position(s) Portfolios in
Held with Fund
Fund and Complex
Name, Address, and Length of Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served* During Past 5 Years Trustee Held by Trustee**
=============================================================================================================
Phyllis Kay Dryden Trustee since Ms. Dryden was a partner of 89 None
December 2004 Mitchell Madison, a
c/o NWD Investment management consulting
Management, Inc. company from January 2006
1200 River Road, until December 2006; she is
Suite 1000, currently a consultant with
Conshohocken, PA 19428 the company. Ms. Dryden was
formerly Managing Partner of
1947 marchFIRST, a global
management consulting firm.
=============================================================================================================
Barbara L. Hennigar Trustee since Retired. 89 None
July 2000
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1935
=============================================================================================================
Barbara I. Jacobs Trustee since Ms. Jacobs served as 89 None
December 2004 Chairman of the Board of
c/o NWD Investment Directors of KICAP Network
Management, Inc. Fund, a European (United
1200 River Road, Kingdom) hedge fund, from
Suite 1000, January 2001 to January
Conshohocken, PA 19428 2006. From 1988-2003, Ms.
Jacobs was also a Managing
1950 Director and European
Portfolio Manager of CREF
Investments (Teachers
Insurance and Annuity
Association -- College
Retirement Equities Fund).
=============================================================================================================
|
==============================================================================================================
(1) (2) (3) (4) (5)
==============================================================================================================
Number of
Position(s) Portfolios in
Held with Fund
Fund and Complex
Name, Address, and Length of Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served* During Past 5 Years Trustee Held by Trustee**
==============================================================================================================
Douglas F. Kridler Trustee since Mr. Kridler has served as 89 None
September 1997 the President and Chief
c/o NWD Investment Executive Officer of the
Management, Inc. Columbus Foundation, (a
1200 River Road, Columbus, OH-based
Suite 1000, foundation which manages
Conshohocken, PA 19428 over 1,300 individual
endowment funds) since
1955 February 2002. Prior to
January 31, 2002, Mr.
Kridler was the President of
the Columbus Association for
the Performing Arts and
Chairman of the Greater
Columbus Convention and
Visitors Bureau.
==============================================================================================================
Michael D. McCarthy Trustee since Retired. Mr. McCarthy was 89 None
December 2004 Chairman of VMAC (Commodity
c/o NWD Investment Swaps) from October 2002
Management, Inc. until January 2007, and a
1200 River Road, partner of Pineville
Suite 1000, Properties LLC (a commercial
Conshohocken, PA 19428 real estate development
firm) from September 2000
1947 until January 2007.
==============================================================================================================
David C. Wetmore Trustee since Retired. 89 None
1995
c/o NWD Investment and Chairman
Management, Inc. since February
1200 River Road, 2005
Suite 1000,
Conshohocken, PA 19428
1948
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|
* Length of time served includes time served with the Trust's predecessors
** Directorships held in (1) any other investment companies registered under
the 1940 Act, (2) any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or (3) any company subject to the requirements of
Section 15(d) of the Exchange Act.
*** Mr. DeVore has served as President of Otterbein College since 1984. Mark Thresher, President and Chief Operating Officer of Nationwide Financial Services, Inc. ("NFS") has served as a member of the Board of Trustees of Otterbein College since 2000, currently serving as one of 30 of its trustees, and is currently one of two Vice Chairmen of the Board. NFS is under common control with each of the companies that serves as an investment adviser or principal underwriter to the Trust, as each is a majority-owned subsidiary of Nationwide Corporation ("NC") and, through NC, of Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%).
Trustees who are Interested Persons (as defined in the 1940 Act) and Officers of the Funds
=================================================================================================================
(1) (2) (3) (4) (5)
=================================================================================================================
Position(s) Number of
Held with Portfolios in
Fund and Fund
Length of Complex
Name, Address, and Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served(1) During Past 5 Years Trustee Held by Trustee(3)
=================================================================================================================
Arden L. Shisler Trustee since Retired; Mr. Shisler is the 89 Director of
February 2000 former President and Chief Nationwide Financial
NWD Investment Management, Executive Officer of KeB Services, Inc. (2)
Inc. Transport, Inc., a trucking
1200 River Road, firm (2000 through 2002). He
Suite 1000, served as a consultant to KeB
Conshohocken, PA 19428 from January 2003 through
December 2004. Since 1992, Mr.
1941 Shisler has also been Chairman
of the Board for Nationwide
Mutual Insurance Company(2).
=================================================================================================================
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=================================================================================================================
(1) (2) (3) (4) (5)
=================================================================================================================
Position(s) Number of
Held with Portfolios in
Fund and Fund
Length of Complex
Name, Address, and Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served(1) During Past 5 Years Trustee Held by Trustee(3)
=================================================================================================================
John H. Grady President and Mr. Grady is President and 89 None
Chief Chief Executive Officer of NWD
NWD Investment Executive Investment Group, the asset
Management, Inc. Officer management operations of
1200 River Road, since Nationwide Mutual Insurance
Suite 1000, December 2006 Company, which includes
Conshohocken, PA 19428 Gartmore Mutual Fund Capital
Trust, (2) Gartmore Morley
Capital Management, Inc.,
(2)NorthPointe Capital LLC,
1961 (2) Gartmore SA Capital Trust,
(2) Gartmore Investor
Services, Inc. (2) and
Gartmore Distribution
Services, Inc. 2 From March
2004 until March 2006, Mr.
Grady was Chief Executive
Officer of Constellation
Investment Management Co., L.P
(registered investment
adviser), and President and
Chief Executive Officer of
Constellation Funds Group
(registered investment
companies). He also was
President of Constellation
Investment Distribution Co.,
Inc. (registered
broker-dealer) from March 2004
until June 2006. From February
2001 until February 2004, Mr.
Grady was Chief Operating and
Chief Legal Officer; Managing
Director, Mutual Funds Group,
Turner Investment Partners,
Inc. (registered investment
adviser); Executive Vice
President of Turner Funds and
Turner Institutional
Portfolios (registered
investment companies); and
President, Turner Investment
Distributors, Inc. (registered
broker-dealer).
=================================================================================================================
|
=================================================================================================================
(1) (2) (3) (4) (5)
=================================================================================================================
Position(s) Number of
Held with Portfolios in
Fund and Fund
Length of Complex
Name, Address, and Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served(1) During Past 5 Years Trustee Held by Trustee(3)
=================================================================================================================
=================================================================================================================
Gerald J. Holland Treasurer Mr. Holland is Senior Vice N/A None
since March President - Operations for NWD
NWD Investment 2001 Investment Management, Inc.
Management, Inc. ("NWD")(2).
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1951
=================================================================================================================
Michael A. Krulikowski Chief Since November 1999, Mr. N/A None
Compliance Krulikowski has served as a
NWD Investment Officer since Vice President and Chief
Management, Inc. June 2004 Compliance Officer of NWD.(3)
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1959
=================================================================================================================
Eric E. Miller Secretary Mr. Miller is Senior Vice N/A None
since President, General Counsel,
NWD Investment December 2002 and Assistant Secretary for
Management, Inc. NWD (3).
1200 River Road
Suite 1000,
Conshohocken, PA 19428
1953
=================================================================================================================
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(1) Length of time served includes time served with the Trust's predecessors.
(2) This position is held with an affiliated person or principal underwriter of the Funds.
(3) Directorships held in: (1) any other investment company registered under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Exchange Act or (3) any company subject to the requirements of Section 15(d) of the Exchange Act.
RESPONSIBILITIES OF THE BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of its Board of Trustees. The Board of Trustees sets and reviews policies regarding the operation of the Trust, and directs the officers to perform the daily functions of the Trust.
BOARD OF TRUSTEE COMMITTEES
The Board of Trustees has four standing committees: Audit, Valuation and Operations, Nominating and Fund Governance and Performance Committees.
The purposes of the Audit Committee are to: (a) oversee the Trust's
accounting and financial reporting policies and practices, its internal controls
and, as appropriate, the internal controls of certain of its service providers;
(b) oversee the quality and objectivity of the Trust's financial statements and
the independent audit thereof; (c) ascertain the independence of the Trust's
independent auditors; (d) act as a liaison between the Trust's independent
auditors and the Board; (e) approve the engagement of the Trust's independent
auditors to (i) render audit and non-audit services for the Trust and (ii)
render non-audit services for the Trust's investment advisers (other than a
subadviser whose role is primarily portfolio management and is overseen by
another investment adviser) and certain other entities under common control with
one of the Trust's investment advisers if the engagement relates to the Trust's
operations and financial reporting; (f) meet and consider the reports of the
Trust's independent auditors; (g) review and make recommendations to the Board
regarding the Code of Ethics of the Trust and that of all Trust advisers,
subadvisers, and principal underwriters and annually review changes to,
violations of, and certifications with respect to such Code of Ethics; and (h)
oversee the Trust's written policies and procedures adopted under Rule 38a-1 of
the 1940 Act and oversee the appointment and performance of the Trust's
designated Chief Compliance Officer. The function of the Audit Committee is
oversight; it is management's responsibility to maintain appropriate systems for
accounting and internal control, and the independent auditors' responsibility to
plan and carry out a proper audit. The independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of the
Trust's shareholders. Each of the members have a working knowledge of basic
finance and accounting matters and are not interested persons of the Trust, as
defined in the 1940 Act. This Committee met six times during the past fiscal
year and currently consists of the following Trustees: Mr. Allen, Ms.
Cholmondeley (Chairperson), Ms. Jacobs and Mr. Wetmore.
The purposes of the Valuation and Operations Committee are to (a) oversee
the implementation and operation of the Trust's Valuation Procedures, applicable
to all of the Trust's portfolio securities; (b) oversee the implementation and
operation of the Trust's Rule 2a-7 Procedures, applicable to the Trust's money
market fund series; (c) oversee the Trust's portfolio brokerage practices; and
(d) oversee distribution of the Trust's shares of beneficial interest. The
Valuation and Operations Committee met five times during the past fiscal year
and currently consists of the following Trustees: Mr. DeVore, Ms. Dryden, Ms.
Hennigar, Mr. Kridler (Chairman), and Mr. McCarthy, each of whom is not an
interested person of the Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has the following powers and responsibilities: (1) selection and nomination of all persons for election or appointment as Trustees of the Trust (provided that nominees for independent Trustee are recommended for selection and approval by all of the incumbent independent Trustees then serving on the Board); (2) periodic review of the composition of the Board to determine whether it may be appropriate to add individuals with specific backgrounds, diversity or skill sets; (3) periodic review of Board governance procedures (including the Board's effectiveness, Trustee retirement, Trustee investment in the Funds and the process by which the Trust's principal service providers are evaluated); (4) review of completed Trustee and Officer Questionnaires and adjust composition of Board by recommending the removal, replacement, or retirement of an incumbent Trustee and may recommend the selection and nomination of an appropriate candidate; (5) oversee the implementation of the Board's policies regarding evaluations of the Board and Trustee peer evaluations; (6) review and make recommendations to the Board regarding the Proxy Voting Guidelines, Policies and Procedures of all Trust advisers and subadvisers; (7) periodic review of Trustee compensation and recommend appropriate changes to the Independent Trustees; (8) oversee implementation of the Trust's Policy Regarding the Service by Trustees on the Boards of Directors of Public Companies and Unaffiliated Fund Companies; (9) annual review and make recommendations to the Board regarding the Board's Statements of Policies Regarding the Enhanced Fund Governance and Oversight By, the Enhanced Independence of, & the Enhanced Effectiveness of the Board of Trustees; and (10) monitoring of the performance of legal counsel employed by the independent Trustees, supervision of counsel for the independent Trustees and monitoring of the performance of legal counsel to the Trust, in consultation with the Trust's management. The Nominating and Fund Governance Committee reports to the full Board with recommendations of any appropriate changes to the Board. This Committee met seven times during the past fiscal year and currently consists of the following Trustees: Mr. DeVore (Chairman), Ms. Cholmondeley, Ms. Dryden, Mr. Kridler, and Mr. Wetmore, each of whom is not an interested person of the Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has adopted procedures regarding its review of recommendations for trustee nominees, including those recommendations presented by shareholders. When
considering whether to add additional or substitute Trustees to the Board of
Trustees of the Trust, the Trustees shall take into account any proposals for
candidates that are properly submitted to the Trust's Secretary. Shareholders
wishing to present one or more candidates for Trustee for consideration may do
so by submitting a signed written request to the Trust's Secretary at attn:
Secretary, Gartmore Mutual Funds, 1200 River Road, Suite 1000, Conshohocken,
Pennsylvania 19428, which includes the following information: (i) name and
address of shareholder and, if applicable, name of broker or record holder; (ii)
number of shares owned; (iii) name of Fund(s) in which shares are owned; (iv)
whether the proposed candidate(s) consent to being identified in any proxy
statement utilized in connecting with the election of Trustees; (v) the name and
background information of the proposed candidates and (vi) a representation that
the candidate or candidates are willing to provide additional information about
themselves, including assurances as to their independence.
The functions of the Performance Committee are: (1) in consultation with
management of the Trust, to review the kind, scope and format of, and the time
periods covered by, the investment performance data and related reports provided
to the Board and, if the Committee determines that changes to such data or
reports would be appropriate and practicable, the Committee will work with
management of the Trust to implement any such changes; (2) in consultation with
management of the Trust, to review the investment performance benchmarks and
peer groups used in reports delivered to the Board for comparison of investment
performance of the Funds and, if the Committee determines that changes to such
benchmarks or peer groups would be appropriate, the Committee will work with
management to implement any such change; (3) in consultation with management of
the Trust, to review such other matters that affect performance, including for
example, fee structures, expense ratios, as the Committee deems to be necessary
and appropriate and work with management to implement any recommended changes;
(4) to review and monitor the performance of the Trust's funds and the fund
family, as a whole, in the manner and to the extent directed by the Board of
Trustees, recognizing that the ultimate oversight of fund performance shall
remain with the full Board of Trustees; (5) to review and monitor the structure
of, and the method used to determine, the compensation of each portfolio manager
of the Trust's funds with respect to management of the Trust's funds and any
other account managed by the portfolio manager; and (6) to review and monitor
material conflicts of interest that may arise from a portfolio manager's
management of multiple accounts.. This Committee met four times during the past
fiscal year and currently consists of the following Trustees: Ms. Hennigar
(Chairperson), Mr. Allen, Ms. Jacobs, Mr. McCarthy, and Mr. Shisler.
OWNERSHIP OF SHARES OF GARTMORE MUTUAL FUNDS AS OF DECEMBER 31, 2006
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES AND/OR SHARES IN ALL
DOLLAR RANGE OF EQUITY REGISTERED INVESTMENT COMPANIES
SECURITIES AND/OR SHARES IN THE OVERSEEN BY TRUSTEE IN FAMILY OF
NAME OF TRUSTEE FUNDS INVESTMENT COMPANIES
Charles E. Allen None $10,001-$50,000
Paula H.J. Cholmondeley None $50,001-$100,000
C. Brent DeVore None Over $100,000
Phyllis Kay Dryden None $10,001-$50,000
Barbara L. Hennigar None $10,001-$50,000
Barbara I. Jacobs None $50,001-$100,000
Douglas F. Kridler None Over $100,000
Michael D. McCarthy None Over $100,000
David C. Wetmore None Over $100,000
Arden L. Shisler None Over $100,000
|
OWNERSHIP IN THE TRUST'S INVESTMENT ADVISERS(1), SUBADVISERS(2) OR DISTRIBUTOR(3) AS OF DECEMBER 31, 2006
TRUSTEES WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) OF THE TRUST.
NAME OF
OWNERS AND
RELATIONSHIPS NAME OF TITLE OF CLASS OF VALUE OF PERCENT OF
NAME OF TRUSTEE TO TRUSTEE COMPANY SECURITY SECURITIES CLASS
Charles E. Allen N/A N/A N/A None N/A
Paula H.J. N/A N/A N/A None N/A
Cholmondeley C. Brent DeVore N/A N/A N/A None N/A
Phyllis Kay Dryden N/A N/A N/A None N/A
Barbara L. Hennigar N/A N/A N/A None N/A
Barbara I. Jacobs N/A N/A N/A None N/A
Douglas F. Kridler N/A N/A N/A None N/A
Michael D. McCarthy N/A N/A N/A None N/A
David C. Wetmore N/A N/A N/A None N/A
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(1) Investment advisers for all of the Trust's funds include Gartmore Mutual Fund Capital Trust and Gartmore Morley Capital Management, Inc.
(2) Subadvisers for other funds not in this SAI include Gartmore Global Partners and NorthPointe Capital, LLC, and BlackRock Investment Management, LLC (formerly known as Fund Asset Management, L.P.)
(3) Gartmore Distribution Services, Inc., or any company, other than an investment company, that controls the Fund's adviser or distributor.
COMPENSATION OF TRUSTEES
The Trustees receive fees and reimbursement for expenses of attending board meetings from the Trust. Each Adviser, based upon a pro rata share for the Funds for which it acts as investment adviser, reimburses the Trust for fees and expenses paid to Trustees who are interested persons of the Trust and who are employees of an adviser or its affiliates. The Compensation Table below sets forth the total compensation paid to the Trustees of the Trust, before reimbursement of expenses, for the fiscal year ended October 31, 2006. In addition, the table sets forth the total compensation to be paid to the Trustees from all funds in the Fund Complex for the twelve months ended October 31, 2006. Trust officers receive no compensation from the Trust in their capacity as officers.
====================================================================================================================
(1) (2) (3) (4) (5)
====================================================================================================================
Pension
Retirement
Aggregate Benefits Accrued Estimated Annual
Compensation as Part of Trust Benefits Upon Total Compensation from
Name of Trustee from the Trust Expenses Retirement the Fund Complex*
====================================================================================================================
Charles E. Allen $65,375 $0 $0 $131,000
====================================================================================================================
Paula H.J. Cholmondeley $62,875 $0 $0 $126,000
====================================================================================================================
C. Brent DeVore $57,125 $0 $0 $114,250
====================================================================================================================
Phyllis Kay Dryden $64,000 $0 $0 $128,000
====================================================================================================================
Barbara L. Hennigar $57,125 $0 $0 $114,250
====================================================================================================================
Barbara I. Jacobs $67,375 $0 $0 $133,750
====================================================================================================================
Douglas F. Kridler $56,125 $0 $0 $112,250
====================================================================================================================
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====================================================================================================================
(1) (2) (3) (4) (5)
====================================================================================================================
Pension
Retirement
Aggregate Benefits Accrued Estimated Annual
Compensation as Part of Trust Benefits Upon Total Compensation from
Name of Trustee from the Trust Expenses Retirement the Fund Complex*
====================================================================================================================
Michael D. McCarthy $52,625 $0 $0 $106,250
====================================================================================================================
Arden L. Shisler $46,750 $0 $0 $ 93,500
====================================================================================================================
David C. Wetmore $86,125 $0 $0 $172,500
====================================================================================================================
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* On October 31, 2006 the Fund Complex included two trusts comprised of 89 investment company funds or series.
Code Of Ethics
Federal law requires the Trust, each of its investment advisers, subadvisers, and principal underwriter to adopt codes of ethics which govern the personal securities transactions of their respective personnel. Accordingly, each such entity has adopted a code of ethics pursuant to which their respective personnel may invest securities for their personal accounts (including securities that may be purchased or held by the Trust). Copies of these Codes of Ethics are on file with the SEC and are available to the public.
INVESTMENT ADVISORY AND OTHER SERVICES
Trust Expenses
The Trust pays the compensation of the Trustees who are not employees of NWD Investment Management, Inc. ("NWDIMI"), or its affiliates, and all expenses (other than those assumed by the adviser), including governmental fees, interest charges, taxes and membership dues in the Investment Company Institute allocable to the Trust; investment advisory fees and any Rule 12b-1 fees; fees under the Trust's Fund Administration Agreement which includes the expenses of calculating the Funds' net asset values; fees and expenses of independent certified public accountants, legal counsel, and any transfer agent, registrar, and dividend disbursing agent of the Trust; expenses of preparing, printing, and mailing shareholder reports, notices, proxy statements, and reports to governmental offices and commissions; expenses connected with the execution, recording, and settlement of portfolio security transactions; insurance premiums; fees and expenses of the custodian for all services to the Trust; expenses of calculating the net asset value of shares of the Trust; expenses of shareholder meetings; and expenses relating to the issuance, registration, and qualification of shares of the Trust. Gartmore Mutual Fund Capital Trust ("GMFCT" or "the Adviser") may, from time to time, agree to voluntarily or contractually waive advisory fees, and if necessary reimburse expenses, in order to limit total operating expenses for the Funds and/or classes, as described below. These expense limitations apply to the classes described; if a particular class is not referenced, there is no expense limitation for that class.
Investment Advisers
Under an Investment Advisory Agreement with the Trust, GMFCT manages the Funds in accordance with the policies and procedures established by the Trustees. GMFCT manages the day-to day investments of the Funds. GMFCT pays the compensation of the officers of the Trust employed by GMFCT and pays a pro rata portion of the compensation and expenses of the Trustees who are employed by NWDIMI and its affiliates. GMFCT also furnishes, at its own expense, all necessary administrative services, office space, equipment, and clerical personnel for servicing the investments of the Trust and maintaining its investment advisory facilities, and executive and supervisory personnel for managing the investments and effecting the portfolio transactions of the Trust. In addition, GMFCT pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other financial institutions in exchange for their selling of shares of the Trust's series or for recordkeeping or other shareholder related services.
The Investment Advisory Agreement also specifically provides that GMFCT, including its directors, officers, and employees, shall not be liable for any error of judgment, or mistake of law, or for any loss arising out of any investment, or for any act or omission in the execution and management of the Trust, except for willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties under the Agreement. The Agreement continues in effect for an initial period of one year and thereafter shall continue automatically for successive annual periods provided such continuance is specifically approved at least annually by the Trustees, or by vote of a majority of the outstanding voting securities of the Trust, and, in either case, by a majority of the Trustees who are not parties to the Agreement or interested persons of any such party. The Agreement terminates automatically in the event of its "assignment," as defined under the 1940 Act. It may be terminated as to a Fund without penalty by vote of a majority of the outstanding voting securities of the Fund, or by either party, on not less than 60 days written notice. The Agreement further provides that GMFCT may render similar services to others.
GMFCT, located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is a wholly-owned subsidiary of NWD Investment Management, Inc., a holding company which is an indirect, wholly-owned subsidiary of NWD Management & Research Trust ("NWD MRT"), also located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428. NWD MRT, which is a registered investment adviser, is a wholly-owned subsidiary of Nationwide Corporation ("Nationwide Corp."). All of the common stock of Nationwide Corp. is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders.
On February 2, 2007, Nationwide Corp. entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase GMFCT (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with GMFCT. The purchase of GMFCT by NFS may be deemed to constitute a change of control, terminating GMFCT's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with GMFCT with respect to each series of the Trust ("Funds") identified below, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with GMFCT are subject to the approval of the Funds' respective shareholders and will take effect upon the sale of GMFCT to NFS, which is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management plc (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
For services provided under the Investment Advisory Agreement, GMFCT receives an annual fee paid monthly based on average daily net assets of the applicable Fund according to the following schedule:
FUND ASSETS INVESTMENT ADVISORY FEE
Gartmore Small Cap Core Fund $0 up to $500 million 0.85%
$500 million up to $2 billion 0.75%
$2 billion and more 0.70%
Gartmore Market Neutral Fund All 1.25%
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Limitation Of Fund Expenses
Gartmore Mutual Fund Capital Trust
In the interest of limiting the expenses of the Funds, GMFCT may from time to time waive some or all of its investment advisory fee or reimburse other fees for the Funds. In this regard, GMFCT has entered into expense limitation agreements with the Trust on behalf of the Funds ("Expense Limitation Agreements"). Pursuant to the
Expense Limitation Agreement, GMFCT has agreed to waive or limit its fees and to assume other expenses to the extent necessary to limit the total annual operating expenses of each Class of the Fund to the limits described below. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short sale dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles, expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. Please note that the waiver of such fees will cause the total return and yield of a Fund to be higher than they would otherwise be in the absence of such a waiver.
GMFCT may request and receive reimbursement from the Funds for the
advisory fees waived or limited and other expenses reimbursed by GMFCT pursuant
to the Expense Limitation Agreements at a later date when a Fund has reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual operating expense ratio of the Fund to exceed the limits in the
Expense Limitation Agreement. No reimbursement will be made to a Fund unless:
(i) the Fund's assets exceed $100 million; (ii) the total annual expense ratio
of the Class making such reimbursement is less than the limit set forth below;
(iii) the payment of such reimbursement is approved by the Board of Trustees on
a quarterly basis; and (iv) the payment of such reimbursement is made no more
than three years from the fiscal year in which the corresponding reimbursement
to the Fund was made. Except as provided for in the Expense Limitation
Agreement, reimbursement of amounts previously waived or assumed by GMFCT is not
permitted.
Until at least February 28, 2008, GMFCT has agreed contractually to waive advisory fees and, if necessary, reimburse expenses for each Fund in order to limit total annual fund operating, excluding any taxes, interest, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, short-sale dividend expenses, Rule 12b-1 fees, fees paid pursuant to the Administrative Services Plan and other expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary expenses for the Funds as follows"
o Gartmore Small Cap Core Fund to 1.25% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares.
o Gartmore Market Neutral Fund to 1.65% for Class A shares, Class B shares, Class C shares, Class R shares, Institutional Service Class shares, and Institutional Class shares.
Investment Advisory Fees
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GMFCT earned the following fees for investment advisory services:
2006
----
Fund Fees Earned(1) Fees Reimbursed
---- -------------- ---------------
Gartmore Small Cap Core Fund(2) $0 $4,711
Gartmore Market Neutral Fund(2) $1,294 $4,379
(1) Fees net of reimbursement.
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Multi-Manager Structure
The Adviser and the Trust have received from the SEC an exemptive order for a multi-manager structure which allows the Adviser to hire, replace or terminate subadvisers without the approval of shareholders; the order also allows the Adviser to revise a subadvisory agreement without shareholder approval. If a subadviser is hired, the change will be communicated to shareholders within 90 days of such change, and the change will be approved by the Trust's Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust or the Adviser. The order is intended to facilitate the efficient operation of the Funds and afford the Trust increased management flexibility.
The Adviser provides investment management evaluation services to the Funds principally by performing initial due diligence on prospective subadvisers for the Funds and thereafter monitoring the performance of the subadviser through quantitative and qualitative analysis as well as periodic in-person, telephonic and written consultations with the subadviser. The Adviser has responsibility for communicating performance expectations and evaluations to the Subadviser and ultimately recommending to the Trust's Board of Trustees whether the subadviser's contract should be renewed, modified or terminated; however, the Adviser does not expect to recommend frequent changes of subadvisers. The Adviser will regularly provide written reports to the Trust's Board of Trustees regarding the results of their evaluation and monitoring functions. Although the Adviser will monitor the performance of the subadvisers, there is no certainty that the subadvisers or the Funds will obtain favorable results at any given time.
Portfolio Managers
Appendix C contains the following information regarding the portfolio manager identified in the Funds' Prospectus: (i) the dollar range of the portfolio manager's investments in each Fund; (ii) a description of the portfolio manager's compensation structure; and (iii) information regarding other accounts managed by the portfolio manager and potential conflicts of interest that might arise from the management of multiple accounts.
Distributor
Gartmore Distribution Services, Inc. ("GDSI" or the "Distributor")) serves as underwriter for the Fund in the continuous distribution of its shares pursuant to an Underwriting Agreement amended as of February 28, 2007 (the "Underwriting Agreement"). Unless otherwise terminated, the Underwriting Agreement will continue for an initial period of two years and from year to year thereafter for successive annual periods, if, as to the Fund, such continuance is approved at least annually by (i) the Trust's Board of Trustees or by the vote of a majority of the outstanding shares of the Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to the Underwriting Agreement or interested persons (as defined in the 1940 Act) of any party to the Underwriting Agreement, cast in person at a meeting called for the purpose of voting on such approval. The Underwriting Agreement may be terminated in the event of any assignment, as defined in the 1940 Act. Until September 30, 2002, Nationwide Securities, Inc. ("NSI") served as the Trust's underwriter. GDSI is a wholly-owned subsidiary of Nationwide Asset Management, Inc. ("NAMI"), a Delaware holding company. NAMI is a wholly-owned subsidiary of Gartmore SA Capital Trust, which is an investment adviser and is wholly-owned by NWDIMI, a Delaware holding company. NWDIMI is a wholly owned, indirect subsidiary of NWD MRT. The following entities or people are affiliates of the Trust and are also affiliates of GDSI:
GMFCT
NWD MRT
Gartmore SA Capital Trust
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
Nationwide Corporation
Nationwide Mutual Insurance Company
John H. Grady
Michael A. Krulikowski
Gerald J. Holland
Eric E. Miller
In its capacity as Distributor, GDSI solicits orders for the sale of shares, advertises and pays the costs of distribution, advertising, office space and the personnel involved in such activities. GDSI receives no compensation under the Underwriting Agreement with the Trust, but may retain all or a portion of the sales charge and 12b-1 fee, if any, imposed upon sales of the Funds' shares.
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GDSI received the following commissions from the sale of shares of the Funds:
-------------------------------------------------------------
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-------------------
Year ended
Funds October 31, 2006
----- ----------------
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund(1) $0
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund(1) $0
--------------------------------------------------------------------------------
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GDSI also receives the proceeds of contingent deferred sales charges imposed on certain redemptions of Class B, Class C, and certain Class A shares. For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GDSI received the following amounts from such sales charges:
-------------------------------------------------------------
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-------------------
Year ended
Funds October 31, 2006
----- ----------------
--------------------------------------------------------------------------------
Gartmore Small Cap Core Fund(1) $0
--------------------------------------------------------------------------------
Gartmore Market Neutral Fund(1) $0
--------------------------------------------------------------------------------
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Distribution Plan
The Trust, with respect to shares of the Funds, has adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the 1940 Act. The Plan permits the Funds to compensate GDSI, as the Funds' principal underwriter, for expenses associated with the distribution of the Funds' Class A, Class B, Class C, or Class R shares, as applicable. Although actual distribution expenses may be more or less, the Funds, or the applicable class, as indicated below, pay GDSI an annual fee under the Plan, regardless of expenses, in annual amount that will not exceed the following amounts:
AMOUNT FUND
------ ----
0.25% of the average daily net assets of the Fund's Class Gartmore Small Cap Core Fund
A shares (distribution or services fee). Gartmore Market Neutral Fund
1.00% of the average daily net assets of the Fund's Class Gartmore Small Cap Core Fund
B shares (0.25% services fee). Gartmore Market Neutral Fund
1.00% of the average daily net assets of the Fund's Class Gartmore Small Cap Core Fund
C shares (0.25% services fee). Gartmore Market Neutral Fund
0.50% of the average daily net assets of the Fund's Class Gartmore Small Cap Core Fund
R shares (0.25% of which may be either a distribution or Gartmore Market Neutral Fund
services fee).
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As required by Rule 12b-1, the Plan was approved by the Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan (the "Independent Trustees"). The Plan was initially approved by the Board of Trustees on March 5, 1998. The Plan may be amended from time to time by vote of a majority of the Trustees, including a majority of the Independent Trustees, cast in person at a meeting called for that purpose. The Plan may be terminated as to the applicable shares of a Fund by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding shares of that Class or Fund, as applicable. Any change in the Plan that would materially increase the distribution cost to the applicable shareholders requires shareholder approval. The Trustees review
quarterly a written report of such costs and the purposes for which such costs
have been incurred. For so long as the Plan is in effect, selection and
nomination of those Trustees who are not interested persons of the Trust shall
be committed to the discretion of such disinterested persons. All agreements
with any person relating to the implementation of the Plan may be terminated at
any time on 60 days' written notice without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of the majority of the
outstanding applicable shares. The Plan will continue in effect for successive
one-year periods, provided that each such continuance is specifically approved
(i) by the vote of a majority of the Independent Trustees, and (ii) by a vote of
a majority of the entire Board of Trustees cast in person at a meeting called
for that purpose. The Board of Trustees has a duty to request and evaluate such
information as may be reasonably necessary for them to make an informed
determination of whether the Plan should be implemented or continued. In
addition the Trustees in approving the Plan as to the Funds must determine that
there is a reasonable likelihood that the Plan will benefit the Funds and their
Shareholders.
The Board of Trustees of the Trust believes that the Plan is in the best interests of the Funds since it encourages Fund growth and maintenance of Fund assets. As the Funds grow in size, certain expenses, and therefore total expenses per share, may be reduced and overall performance per share may be improved.
GDSI has entered into, and will enter into, from time to time, agreements with selected dealers pursuant to which such dealers will provide certain services in connection with the distribution of the Funds' shares including, but not limited to, those discussed above. GDSI or an affiliate of GDSI pays additional amounts from its own resources to dealers or other financial intermediaries, including its affiliate NFS or its subsidiaries, for aid in distribution or for aid in providing administrative services to shareholders.
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GDSI earned the distribution fees under the Plan as shown in the following table.
------------------------------------------------------------------------------------------------------------- Fund Class A Class B Class C Class R ------------------------------------------------------------------------------------------------------------- Gartmore Small Cap Core Fund $0 $1 $1 $0 ------------------------------------------------------------------------------------------------------------- Gartmore Market Neutral Fund $0 $1 $1 $0 ------------------------------------------------------------------------------------------------------------- |
The Trust has been informed by GDSI that for the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, the following expenditures were made using the 12b-1 fees received by GDSI with respect to the Fund:
-------------------------------------------------------------------------------------------------------------
Financing Broker-
Prospectus Distributor Charges with Dealer
Printing & Compensation & respect to B & Compensation
Fund Mailing(1) Costs C shares & Costs
-------------------------------------------------------------------------------------------------------------
Gartmore Small Cap Core Fund $0.26 $0 $1.74 $0
-------------------------------------------------------------------------------------------------------------
Gartmore Market Neutral Fund $0.30 $0 $1.70 $0
-------------------------------------------------------------------------------------------------------------
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(1) Printing and mailing of prospectuses to other than current Fund shareholders.
Fund Administration And Transfer Agency Services
Under the terms of the Fund Administration and Transfer Agency Agreement, Gartmore SA Capital Trust ("GSA"), a wholly-owned subsidiary of NWDIMI, provides for various administrative and accounting services, including daily valuation of the Funds' shares, preparation of financial statements, tax returns, and regulatory reports, and presentation of quarterly reports to the Board of Trustees. NWDIMI is a wholly-owned, indirect subsidiary of NWD MRT. Gartmore Investors Services Inc. ("GISI"), an indirect subsidiary of GSA, serves as
transfer agent and dividend disbursing agent for each of the Funds. Both GSA and GISI are located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428. For the fund administration and transfer agency services, the Funds pays GSA and GISI a combined annual fee based on the Trust's average daily net assets according to the following schedule:
AGGREGATE TRUST FEE
AS A PERCENTAGE OF NET
ASSET LEVEL ASSETS
----------- ------
$0 up to $1 billion 0.26%
$1 billion up to $3 billion 0.19%
$3 billion up to $4 billion 0.15%
$4 billion up to $5 billion 0.08%
$5 billion up to $10 billion 0.05%
$10 billion up to $12 billion 0.03%
$12 billion and more 0.02%
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For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GSA and GISI were paid combined fund administration and transfer agency fees from the Funds as follows:
------------------------------------------------------------------ Fund 2006 ------------------------------------------------------------------ Gartmore Small Cap Core Fund $914 ------------------------------------------------------------------ Gartmore Market Neutral Fund $702 ------------------------------------------------------------------ |
Sub-Administration
GSA and GISI have entered into a Services Agreement with BISYS Fund Services Ohio, Inc. ("BISYS"), effective November 1, 2001, to provide certain fund administration and transfer agency services for each of the Funds. For these services, GSA pays BISYS an annual fee at the following rates based on the average daily net assets of the aggregate of all the funds of the Trust that BISYS is providing such services for:
AGGREGATE TRUST FEE
AS A PERCENTAGE OF NET
ASSET LEVEL ASSETS
----------- ------
$0 up to $1 billion 0.20%
$1 billion up to $3 billion 0.15%
$3 billion up to $4 billion 0.10%
$4 billion up to $5 billion 0.05%
$5 billion up to $10 billion 0.02%
$10 billion up to $12 billion 0.01%
$12 billion and more 0.005%
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BISYS received the following amounts for the sub-administration services and sub-transfer agency services it provided:
Administrative Services Plan
Under the terms of an Administrative Services Plan, the Trust is permitted to enter into Servicing Agreements with servicing organizations, such as broker-dealers and financial institutions, who agree to provide certain administrative support services in connection with the Class A, Class R, and Institutional Service Class shares of the Funds. Such administrative support services include, but are not limited to, the following: establishing and maintaining shareholder accounts; processing purchase and redemption transactions; arranging for bank wires;
performing shareholder sub-accounting; answering inquiries regarding the Funds; providing periodic statements showing the account balance for beneficial owners or for plan participants or contract holders of insurance company separate accounts; transmitting proxy statements, periodic reports, updated prospectuses and other communications to shareholders and, with respect to meetings of shareholders, collecting, tabulating and forwarding to the Trust executed proxies and obtaining such other information and performing such other services as may reasonably be required. With respect to the Class R shares, these types of administrative support services will be exclusively provided for retirement plans and their plan participants.
As authorized by the Administrative Services Plan for the Funds, the Trust has entered into a Servicing Agreement for the Funds pursuant to which NFS has agreed to provide certain administrative support services in connection with the applicable Fund shares held beneficially by its customers. NFS is a majority owned subsidiary of Nationwide Corporation, which also owns NWD MRT. In consideration for providing administrative support services, NFS and other entities with which the Trust may enter into Servicing Agreements (which may include GDSI) will receive a fee, computed at the annual rate of up to 0.25%, 0.25% and 0.15% of the average daily net assets of the Class A, Class R and Institutional Service Class shares of each Fund, respectively.
Custodian
JPMorgan Chase Bank, 4 New York Plaza, New York, New York 10008, is the Custodian for the Trust and makes all receipts and disbursements under a Custodian Agreement. The Custodian performs no managerial or policy making functions for the Funds.
Legal Counsel
Stradley Ronon Stevens & Young, LLP, 2600 One Commerce Square, Philadelphia, Pennsylvania 19103, serves as the Trust's legal counsel.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1700, 2001 Market Street, Philadelphia, Pennsylvania 19103-7042, serves as the Independent Registered Public Accounting Firm for the Trust.
BROKERAGE ALLOCATION
GMFCT (or a subadviser) is responsible for decisions to buy and sell securities and other investments for the Funds, the selection of brokers and dealers to effect the transactions and the negotiation of brokerage commissions, if any. In transactions on stock and commodity exchanges in the United States, these commissions are negotiated, whereas on foreign stock and commodity exchanges these commissions are generally fixed and are generally higher than brokerage commissions in the United States. In the case of securities traded on the over-the-counter markets or for securities traded on a principal basis, there is generally no commission, but the price includes a spread between the dealer's purchase and sale price. This spread is the dealer's profit. In underwritten offerings, the price includes a disclosed, fixed commission or discount. Most short-term obligations are normally traded on a "principal" rather than agency basis. This may be done through a dealer (e.g., a securities firm or bank) who buys or sells for its own account rather than as an agent for another client, or directly with the issuer.
Except as described below, the primary consideration in portfolio security transactions is best price and execution of the transaction (i.e., execution at the most favorable prices and in the most effective manner possible). "Best price-best execution" encompasses many factors affecting the overall benefit obtained by the client account in the transaction including, but not necessarily limited to, the price paid or received for a security, the commission charged; the promptness, availability and reliability of execution; the confidentiality and placement accorded the order; and customer service. Therefore, "best price-best execution" does not necessarily mean obtaining the best price alone but is evaluated in the context of all the execution services provided. GMFCT has complete freedom as to the markets in and the broker-dealers through which it seeks this result.
Subject to the primary consideration of seeking best price-best execution and as discussed below, securities may be bought or sold through broker-dealers who have furnished statistical, research, and other information or
services to the Adviser. In placing orders with such broker-dealers, the Adviser will, where possible, take into account the comparative usefulness of such information. Such information is useful to the Adviser even though its dollar value may be indeterminable, and its receipt or availability generally does not reduce the Adviser's normal research activities or expenses.
There may be occasions when portfolio transactions for the Funds are executed as part of concurrent authorizations to purchase or sell the same security for trusts or other accounts (including other mutual funds) served by the Adviser or by an affiliated company thereof. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to the Funds, they are affected only when the Adviser believes that to do so is in the interest of the Funds. When such concurrent authorizations occur, the executions will be allocated in an equitable manner.
In purchasing and selling investments for the Funds, it is the policy of the Adviser and subadvisers to obtain best execution at the most favorable prices through responsible broker-dealers. The determination of what may constitute best execution in a securities transaction by a broker involves a number of considerations, including the overall direct net economic result to the Funds (involving both price paid or received and any commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction at all when a large block is involved, the availability of the broker to stand ready to execute possibly difficult transactions in the future, the professionalism of the broker, and the financial strength and stability of the broker. These considerations are judgmental and are weighed by the Adviser in determining the overall reasonableness of securities executions and commissions paid. In selecting broker-dealers, the Adviser will consider various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security or asset to be purchased or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer's firm; the broker-dealer's execution services, rendered on a continuing basis; and the reasonableness of any commissions.
The Adviser may cause the Funds to pay a broker-dealer who furnishes brokerage and/or research services a commission that is in excess of the commission another broker-dealer would have received for executing the transaction if it is determined, pursuant to the requirements of Section 28(e) of the Securities Exchange Act of 1934, that such commission is reasonable in relation to the value of the brokerage and/or research services provided. Such research services may include, among other things, analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, analytic or modeling software, market data feeds and historical market information. Any such research and other information provided by brokers to the Adviser is considered to be in addition to and not in lieu of services required to be performed by it under its investment advisory. The fees paid to the Adviser pursuant to its investment advisory agreement are not reduced by reason of its receiving any brokerage and research services. The research services provided by broker-dealers can be useful to the Adviser in serving its other clients. All research services received from the brokers to whom commission are paid are used collectively, meaning such services may not actually be utilized in connection with each client account that may have provided the commission paid to the brokers providing such services. The Adviser is prohibited from considering the broker-dealer's sale of shares of the Funds, except as may be specifically permitted by law.
Fund portfolio transactions may be effected with broker-dealers who have assisted investors in the purchase of variable annuity contracts or variable insurance policies issued by Nationwide Life Insurance Company or Nationwide Life & Annuity Insurance Company. However, neither such assistance nor sale of other investment company shares is a qualifying or disqualifying factor in a broker-dealer's selection, nor is the selection of any broker-dealer based on the volume of shares sold.
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, the following brokerage commissions were paid by the Funds:
-------------------------------------------------------------- Gartmore Market Neutral Fund $5,311 -------------------------------------------------------------- Gartmore Small Cap Core Fund $5,264 -------------------------------------------------------------- |
As of October 31, 2006, the Fund held investments in securities of their regular broker-dealers as follows:
Approximate Aggregate
Value of Issuer's
Securities Owned by the
Fund as of
fiscal year end Name of
Fund October 31, 2006 Broker or Dealer
---- ---------------- ----------------
Gartmore Market Neutral Fund 15,386 Prudential Financial, Inc.
268,362 CS First Boston Corp
Gartmore Small Cap Core Fund 107,206 CS First Boston Corp.
22,380 Knight Securities, LP
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Under the 1940 Act, "affiliated persons" of the Funds are prohibited from dealing with it as a principal in the purchase and sale of securities unless an exemptive order allowing such transactions is obtained from the SEC. However, the Funds may purchase securities from underwriting syndicates of which an affiliate, as defined in the 1940 Act, is a member under certain conditions, in accordance with Rule 10f-3 under the 1940 Act.
The Funds contemplate that, consistent with the policy of obtaining best
results, brokerage transactions may be conducted through "affiliated
broker/dealers," as defined in the 1940 Act. Under the 1940 Act, commissions
paid by the Funds to an "affiliated broker/dealer" in connection with a purchase
or sale of securities offered on a securities exchange may not exceed the usual
and customary broker's commission. Accordingly, it is the Funds' policy that the
commissions to be paid to an affiliated broker-dealer must, in its judgment, be
(1) at least as favorable as those that would be charged by other brokers having
comparable execution capability and (2) at least as favorable as commissions
contemporaneously charged by such broker/dealer on comparable transactions for
its most favored unaffiliated customers, except for accounts for which the
affiliated broker/dealer acts as a clearing broker for another brokerage firm
and customers of an affiliated broker/dealer considered by a majority of the
independent trustees not to be comparable to the Funds. The Funds do not deem it
practicable and in their best interests to solicit competitive bids for
commissions on each transaction. However, consideration regularly is given to
information concerning the prevailing level of commissions charged on comparable
transactions by other brokers during comparable periods of time.
Purchases, Redemptions and Pricing Of Shares
All investments in the Trust are credited to the shareholder's account in the form of full and fractional shares of the designated Fund (rounded to the nearest 1/1000 of a share). The Trust does not issue share certificates.
The NAV per share of each Fund is determined once daily, as of the close of regular trading on the New York Stock Exchange (the "Exchange") (generally 4 P.M. Eastern Time) on each business day the Exchange is open for regular trading (and on such other days as the Board determines). However, to the extent that a Fund's investments are traded in markets that are open when the New York Stock Exchange is closed, the value of a Fund's investments may change on days when shares cannot be purchased or redeemed.
The Trust will not compute NAV for the Funds on customary national business holidays, including the following: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and other days when the New York Stock Exchange is closed.
The Funds reserve the right to not determine NAV when: (i) the Funds have not received any orders to purchase, sell or exchange shares and (ii) changes in the value of a Fund's portfolio do not affect the Fund's net asset value.
The offering price for orders placed before the close of the Exchange, on each business day the Exchange is open for trading, will be based upon calculation of the NAV at the close of regular trading on the Exchange. For orders placed after the close of regular trading on the Exchange, or on a day on which the Exchange is not open for
trading, the offering price is based upon NAV at the close of the Exchange on the next day thereafter on which the Exchange is open for trading. The NAV of a share of a Fund on which offering and redemption prices are based is the NAV of the Fund, divided by the number of shares outstanding, with the result adjusted to the nearer cent. The NAV of the Funds is determined by subtracting the liabilities of the Funds from the value of its assets (chiefly composed of investment securities). The NAV per share for a class is calculated by adding the value of all securities and other assets of a Fund allocable to the class, deducting liabilities allocable to that class, and dividing by the number of that class' shares outstanding.
Securities for which market quotations are readily available are values at current market value as of Valuation Time. Valuation Time will be as of the close of regular trading on the New York Stock Exchange (usually 4 P.M. Eastern Time). Equity securities are valued at the last quoted sale price, or if there is no sale price, the last quoted bid price provided by an independent pricing service approved by the Board of Trustees. Securities traded on NASDAQ are valued at the NASDAQ Official Closing Price. Prices are taken from the primary market or exchange in which each security trades.
Debt and other fixed-income securities (other than short-term obligations) are valued at the last quoted bid price and/or by using a combination of daily quotes and matrix evaluations provided by an independent pricing service, the use of which has been approved by the Board of Trustees of the Trust. Short-term debt securities such as commercial paper and U.S. treasury bills, having a remaining maturity of 60 days or less are considered to be "short-term" and are valued at amortized cost which approximates market value. The pricing service activities and results are reviewed by an officer of the Trust. Debt Securities of the Trust's Money Market Funds are valued at amortized cost, which approximates market value.
The pricing service activities and results are reviewed by an officer of the Trust. Securities for which market quotations are not readily available, or for which an independent pricing service does not provide a value or provides a value that does not represent fair value in the judgment of GMFCT or designee, are valued at fair value under procedures approved by the Board of Trustees of the Trust. Fair value determinations are required for securities whose value is affected by a significant event that will materially affect the value of a domestic or foreign security and which occurs subsequent to the time of the close of the principal market on which such domestic or foreign security trades but prior to the calculation of the Funds' NAV.
Each Fund values foreign equity securities at fair value in the circumstances described below. Generally, trading in foreign securities markets is completed each day at various times prior to the Valuation Time. Due to the time differences between the closings of the relevant foreign securities exchanges and the Valuation Time for the Funds, the Funds will fair value their foreign investments when the market quotations for the foreign investments either are not readily available or are unreliable and, therefore, do not represent fair value. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on the Funds' foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust have determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair valuation of portfolio securities may occur on a daily basis. The fair value pricing by the Trust utilizes data furnished by an independent pricing service (and that data draws upon, among other information, the market values of foreign investments). The fair value prices of portfolio securities generally will be used when it is determined that the use of such prices will have an impact on the net asset value of the Funds. When the Funds use fair value pricing, the values assigned to the Funds' foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
The Trust may suspend the right of redemption for such periods as are permitted under the 1940 Act and under the following unusual circumstances: (a) when the New York Stock Exchange is closed (other than weekends and holidays) or trading is restricted; (b) when an emergency exists, making disposal of portfolio securities or the valuation of net assets not reasonably practicable; or (c) during any period when the SEC has by order permitted a suspension of redemption for the protection of shareholders.
Systematic Investment Strategies
Automatic Asset Accumulation - This is a systematic investment strategy which combines automatic monthly transfers from your personal checking account to your mutual fund account with the concept of Dollar Cost Averaging. With this strategy, you invest a fixed amount monthly over an extended period of time, during both market highs and lows. Dollar Cost Averaging can allow you to achieve a favorable average share cost over time since your fixed monthly investment buys more shares when share prices fall during low markets, and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past. Once you have opened an account with at least $1,000, you can contribute to an Automatic Asset Accumulation plan for as little as $50 a month in the Funds.
Automatic Asset Transfer - This systematic investment plan allows you to transfer $25 or more to one Fund from another Fund systematically, monthly or quarterly, after Fund minimums have been met. The money is transferred on the 25th day of the month as selected or on the preceding business day. Dividends of any amount can be moved automatically from one Fund to another at the time they are paid. This strategy can provide investors with the benefits of Dollar Cost Averaging through an opportunity to achieve a favorable average share cost over time. With this plan, your fixed monthly or quarterly transfer from the Fund to any other Fund you select buys more shares when share prices fall during low markets and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past. For transfers from the Prime Shares of the Gartmore Money Market Fund to another Fund, sales charges may apply if not already paid.
Automatic Withdrawal Plan ($50 or More) - You may have checks for any fixed amount of $50 or more automatically sent bi-monthly, monthly, quarterly, semiannually or annually, to you (or anyone you designate) from your account for Class A, Class B, and Class C shares. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Transfer Agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce and eventually deplete your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge. The $50 minimum is waived for required minimum distributions from individual retirement accounts.
NOTE: If you are withdrawing more shares than your account receives in dividends, you will be decreasing your total shares owned, which will reduce your future dividend potential.
Automatic Withdrawal Plan (AWP) on Class B Shares - You will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year.
For each AWP payment, assets that are not subject to a CDSC, such as appreciation on shares and shares acquired through reinvestment of dividends and/or capital gains distributions, will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC to cover a particular AWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any dividends and/or capital gains distributions taken in cash by a shareholder who receives payments through AWP will also count toward the 12% limit. In the case of AWP, the 12% limit is calculated at the time of an automatic redemption is first made, and is recalculated at the time each additional automatic redemption is made.
Investor Privileges
The Funds offer the following privileges to shareholders. Additional information may be obtained by calling GDSI toll free at 800-848-0920.
No Sales Charge on Reinvestments - All dividends and capital gains will be automatically reinvested free of charge in the form of additional shares within the same Fund and class or another specifically requested Fund (but the same class) unless you have chosen to receive them in cash on your application. Unless requested in writing by the shareholder, the Trust will not mail checks for dividends and capital gains of less than $5 but instead they will be automatically reinvested in the form of additional shares.
Exchange Privilege - The exchange privilege is a convenient way to exchange shares from one Gartmore Fund to another Gartmore Fund in order to respond to changes in your goals or in market conditions. The registration of the account to which you are making an exchange must be exactly the same as that of the fund account from which the exchange is made, and the amount you exchange must meet the applicable minimum investment of the Fund being purchased. The exchange privilege may be limited due to excessive trading or market timing of fund shares.
Exchanges among Gartmore Funds
Exchanges may be made among any of the Gartmore Funds within the same class of shares (except for any other Fund not currently accepting purchase orders or Class X or Class Y shares of the Fixed Income Funds), so long as both accounts have the same owner, and your first purchase in the new fund meets the new fund's minimum investment requirement (and subject to the investor eligibility requirements for the Gartmore Short Duration Bond Fund).
Because Class R shares of the Funds are held within retirement plans, exchange privileges with other Class R shares of the Gartmore Funds may not be available unless the Class R shares of the other Gartmore Funds are also available within a plan. Please contact your retirement plan administrator for information on how to exchange your Class R shares within your retirement plan.
Generally, there is no sales charge for exchanges of Class B, Class C, Class R, Institutional Service Class or Institutional Class shares. However, if your exchange involves certain Class A shares, you may have to pay the difference between the sales charges if a higher sales charge applies to the Fund into which you are exchanging. If you exchange your Class A shares that are subject to a CDSC into another Gartmore Fund and then redeem those Class A shares within 18 months of the original purchase (24 months for Gartmore Enhanced Income Fund and Gartmore Short Duration Bond Fund), the applicable CDSC will be the CDSC for the Fund. Exchanges into the Prime Shares of the Money Market Fund are only permitted from Class A, Class B, Class C and Institutional Service Class shares of the Fund. If you exchange Class B or Class C shares (or certain Class A shares subject to a CDSC) for Prime Shares of the Money Market Fund, the time you hold the shares in the Money Market Fund will not be counted for purposes of calculating any CDSC. As a result, if you then sell your Prime Shares of the Money Market Fund, you will pay the sales charge that would have been charged if the initial Class B, Class C (or certain Class A) shares had been sold at the time they were originally exchanged into the Money Market Fund. If you exchange your Prime Shares of the Money Market Fund back into Class B, Class C (or certain Class A) shares, the time you held Class B, Class C (or certain Class A) shares prior to the initial exchange into the Money Market Fund will be counted for purposes or calculating the CDSC. If you wish to purchase shares of a Fund or class for which the exchange privilege does not apply, you will pay any applicable CDSC at the time you redeem your shares and pay any applicable front-end load on a new Fund you are purchasing unless a sales charge waiver otherwise applies.
Exchanges May Be Made Four Convenient Ways:
By Telephone
Automated Voice Response System - You can automatically process exchanges by calling 800-848-0920, 24 hours a day, seven days a week. However, if you declined the option on the application, you will not have this automatic exchange privilege. This system also gives you quick, easy access to mutual fund information. Select from a menu of choices to conduct transactions and hear Fund price information, mailing and wiring instructions as well as other mutual fund information. You must call our toll free number by the Valuation Time to receive that day's closing share price. The Valuation Time is the close of regular trading of the New York Stock Exchange, which is usually 4:00 p.m. Eastern Time.
Customer Service Line - By calling 800-848-0920, you may exchange shares by telephone. Requests may be made only by the account owner(s). You must call our toll free number by the Valuation Time to receive that day's closing share price.
The Funds may record all instructions to exchange shares. The Funds reserve the right at any time without prior notice to suspend, limit or terminate the telephone exchange privilege or its use in any manner by any person or class.
The Funds will employ the same procedure described under "Buying, Selling and Exchanging Fund Shares" in the Prospectus to confirm that the instructions are genuine.
The Funds will not be liable for any loss, injury, damage, or expense as a result of acting upon instructions communicated by telephone reasonably believed to be genuine, and the Funds will be held harmless from any loss, claims or liability arising from its compliance with such instructions. These options are subject to the terms and conditions set forth in the Prospectus and all telephone transaction calls may be recorded. The Funds reserve the right to revoke this privilege at any time without notice to shareholders and request the redemption in writing, signed by all shareholders.
By Mail or Fax - Write to Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205 or fax (614) 428-3278. Please be sure that your letter or facsimile is signed exactly as your account is registered and that your account number and the Fund from which you wish to make the exchange are included. For example, if your account is registered "John Doe and Mary Doe", "Joint Tenants With Right of Survivorship,' then both John and Mary must sign the exchange request. The exchange will be processed effective the date the signed letter or fax is received. Fax requests received after the Valuation Time will be processed as of the next business day. The Fund reserves the right to require the original document if you use the fax method.
By On-Line Access - Log on to our website www.nwdfunds.com 24 hours a day, seven days a week, for easy access to your mutual fund accounts. Once you have reached the website, you will be instructed on how to select a password and perform transactions. You can choose to receive information on all Gartmore Funds as well as your own personal accounts. You may also perform transactions, such as purchases, redemptions and exchanges. The Funds may terminate the ability to buy Fund shares on their website at any time, in which case you may continue to exchange shares by mail, wire or telephone pursuant to the Prospectus.
Investor Services
Automated Voice Response System - Our toll free number 800-848-0920 will connect you 24 hours a day, seven days a week to the system. Through a selection of menu options, you can conduct transactions, hear fund price information, mailing and wiring instructions and other mutual fund information.
Toll Free Information and Assistance - Customer service representatives
are available to answer questions regarding the Funds and your account(s)
between the hours of 8 a.m. and 9 p.m. Eastern Time (Monday through
Friday). Call toll free: 800-848-0920 or contact us at our fax number
(614) 428-3278.
Retirement Plans- Shares of the Funds may be purchased for Self-Employed Retirement Plans, Individual Retirement Accounts (IRAs), Roth IRAs, Coverdell Education Savings Accounts, Simplified Employee Pension Plans, Corporate Pension Plans, Profit Sharing Plans and Money Purchase Plans. For a free information kit, call 800-848-0920.
Shareholder Confirmations - You will receive a confirmation statement each time a requested transaction is processed. However, no confirmations are mailed on certain pre-authorized, systematic transactions, or IRAs. Instead, these will appear on your next consolidated statement.
Consolidated Statements - Shareholders of the Funds receive quarterly statements as of the end of March, June, September and December. Please review your statement carefully and notify us immediately if there is a discrepancy or error in your account.
For shareholders with multiple accounts, your consolidated statement will reflect all your current holdings in the Gartmore Funds. Your accounts are consolidated by Social Security number and zip code. Accounts in your household under other Social Security numbers may be added to your statement at your request. Only
transactions during the reporting period will be reflected on the statements. An annual summary statement reflecting all calendar-year transactions in all your funds will be sent after year-end.
Average Cost Statement - This statement may aid you in preparing your tax return and in reporting capital gains and losses to the IRS. If you redeemed any shares during the calendar year, a statement reflecting your taxable gain or loss for the calendar year (based on the average cost you paid for the redeemed shares) will be mailed to you following each year-end. Average cost can only be calculated on accounts opened on or after January 1, 1984. Fiduciary accounts and accounts with shares acquired by gift, inheritance, transfer, or by any means other than a purchase cannot be calculated.
Average cost is one of the IRS approved methods available to compute gains or losses. You may wish to consult a tax adviser on the other methods available. The average cost information will not be provided to the IRS. If you have any questions, contact one of our service representatives at 800-848-0920.
Shareholder Reports - All shareholders will receive reports semiannually detailing the financial operations of the Funds.
Prospectuses - An updated prospectus will be mailed to you at least annually.
Undeliverable Mail - If mail from a Fund to a shareholder is returned as undeliverable on two or more consecutive occasions, the Fund will not send any future mail to the shareholder unless it receives notification of a correct mailing address for the shareholder. With respect to any redemption checks or dividend/capital gains distribution checks that are returned as undeliverable or not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and any future distributions in shares of the Fund at the then-current net asset value of the Fund until the Fund receives further instructions from the shareholder.
Performance Advertising
The Funds may use past performance in advertisements, sales literature, and their Prospectus, including calculations of average annual total return as described below.
Total Return
The Funds may from time to time advertise historical performance, subject to Rule 482 under the Securities Act, or Rule 34b-1 under the 1940 Act. An investor should keep in mind that any return or yield quoted represents past performance and is not a guarantee of future results. The investment return and principal value of investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
All performance advertisements shall include average annual total return quotations for the most recent one-, five-, and ten-year periods (or life, if the Funds have been in operation less than one of the prescribed periods). Average annual total return represents the rate required each year for an initial investment to equal the redeemable value at the end of the quoted period. It is calculated in a uniform manner by dividing the ending redeemable value of a hypothetical initial payment of $1,000 for a specified period of time, by the amount of the initial payment, assuming reinvestment of all dividends and distributions. The one-, five-, and ten-year periods are calculated based on periods that end on the last day of the calendar quarter preceding the date on which an advertisement is submitted for publication.
ADDITIONAL INFORMATION
Description Of Shares
The Amended Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest of a Fund and to divide or combine such shares into a greater or lesser number of shares without thereby exchanging the proportionate beneficial interests in the Trust. Each share of a Fund represents an equal proportionate interest in a Fund with each other share. The Trust reserves the right to create and issue a number of different funds. Shares of the Fund would participate equally in the earnings, dividends, and assets of
those particular funds. Upon liquidation of the Fund, shareholders are entitled to share pro rata in the net assets of the Fund available for distribution to shareholders.
The Trust is currently authorized to offer shares of beneficial interest, without par value, in 49 series. With respect to the Funds, the Trust is authorized to offer the following share classes: Class A, Class B, Class C, Class R, Institutional Service Class, and Institutional Class.
You have an interest only in the assets of the shares of a Fund which you own. Shares of a particular class are equal in all respects to the other shares of that class. In the event of liquidation of a Fund, shares of the same class will share pro rata in the distribution of the net assets of the Fund with all other shares of that class. All shares are without par value and when issued and paid for, are fully paid and nonassessable by the Trust. Shares may be exchanged or converted as described in this SAI and in the Prospectus but will have no other preference, conversion, exchange or preemptive rights.
Voting Rights
Shareholders of each class of shares have one vote for each share held and a proportionate fractional vote for any fractional share held. An annual or special meeting of shareholders to conduct necessary business is not required by the Declaration of Trust, the 1940 Act or other authority except, under certain circumstances, to amend the Declaration of Trust, the Investment Advisory Agreement, fundamental investment objectives, investment policies and investment restrictions, to elect and remove Trustees, to reorganize the Trust or any series or class thereof and to act upon certain other business matters. In regard to termination, sale of assets, the change of investment objectives, policies and restrictions or the approval of an Investment Advisory Agreement, the right to vote is limited to the holders of shares of the particular fund affected by the proposal. In addition, holders of shares subject to a Rule 12b-1 fee will vote as a class and not with holders of any other class with respect to the approval of the Distribution Plan.
To the extent that such a meeting is not required, the Trust does not intend to have an annual or special meeting of shareholders. The Trust has represented to the SEC that the Trustees will call a special meeting of shareholders for purposes of considering the removal of one or more Trustees upon written request therefor from shareholders holding not less than 10% of the outstanding votes of the Trust and the Trust will assist in communicating with other shareholders as required by Section 16(c) of the 1940 Act. At such meeting, a quorum of shareholders (constituting a majority of votes attributable to all outstanding shares of the Trust), by majority vote, has the power to remove one or more Trustees.
Shareholder Inquiries
All inquiries regarding the Trust should be directed to the Trust at the telephone number or address shown on the cover page of this SAI.
ADDITIONAL GENERAL TAX INFORMATION
Buying a dividend
If you invest in a Fund shortly before the record date of a taxable distribution, the distribution will lower the value of the Fund's shares by the amount of the distribution, and you will in effect receive some of your investment back, but in the form of a taxable distribution.
Multi-class funds
Each Fund calculates dividends and capital gain distributions in the same manner for each class. The amount of any dividends per share will differ, however, generally due to the difference in the distribution and service (Rule 12b-1) and administrative services fees applicable to each class.
Distributions of net investment income
Each Fund receives income generally in the form of dividends and interest on its investments. This income, less expenses incurred in the operation of a Fund, constitutes the Fund's net investment income from which income dividends may be paid to you. If you are a taxable investor, any distributions by a Fund from such income (other than qualified dividend income received by individuals) will be taxable to you at ordinary income tax rates, whether you receive them in cash or in additional shares. Distributions from qualified dividend income will be taxable to individuals at long-term capital gain rates, provided certain holding period requirements are met. See the discussion below under the heading, "Qualified Dividend Income for Individuals."
Distributions of capital gain
Each Fund may realize a capital gain or loss in connection with sales or other dispositions of its portfolio securities. Distributions from net short-term capital gain will be taxable to you as ordinary income. Distributions paid from the excess of net long-term capital gain over net short-term capital loss will be taxable to you as long-term capital gain, regardless of how long you have held your shares in a Fund. Any net short-term or long-term capital gain realized by a Fund (net of any capital loss carryovers) generally will be distributed once each year and may be distributed more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund.
Returns of Capital
If a Fund's distributions exceed its taxable income and capital gains realized during a taxable year, all or a portion of the distributions made in the same taxable year may be recharacterized as a return of capital to shareholders. A return of capital distribution will generally not be taxable, but will reduce each shareholder's cost basis in a Fund and result in a higher reported capital gain or lower reported capital loss when those shares on which the distribution was received are sold. Any return of capital in excess of your basis, however, is taxable as a capital gain.
Investments in foreign securities
Effect of Foreign Withholding Taxes. A Fund may be subject to foreign withholding taxes on income from certain foreign securities. This, in turn, could reduce the Fund's distributions paid to you.
Effect of foreign debt investments on distributions. Most foreign exchange gains realized on the sale of debt securities are treated as ordinary income by a Fund. Similarly, foreign exchange losses realized on the sale of debt securities generally are treated as ordinary losses. These gains when distributed are taxable to you as ordinary income, and any losses reduce a Fund's ordinary income otherwise available for distribution to you. This treatment could increase or decrease a Fund's ordinary income distributions to you, and may cause some or all of the Fund's previously distributed income to be classified as a return of capital.
PFIC securities. A Fund may invest in securities of foreign entities that could be deemed for tax purposes to be passive foreign investment companies (PFICs). When investing in PFIC securities, each Fund intends to mark-to-market these securities and recognizes any gains at the end of its fiscal and excise (described below) tax years. Deductions for losses are allowable only to the extent of any current or previously recognized gains. These gains (reduced by allowable losses) are treated as ordinary income that a Fund is required to distribute, even though it has not sold the securities. You should also be aware that the designation of a foreign security as a PFIC security would cause its income dividends to fall outside of the definition of qualified foreign corporation dividends. These dividends will not qualify for the reduced rate of taxation on qualified dividends for individuals when distributed to you by a Fund. If a Fund is unable to identify an investment as a PFIC and thus does not make a mark-to-market election, the Fund may be subject to U.S. federal income tax on a portion of any "excess distribution" or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature of interest may be imposed on the Fund in respect of deferred taxes arising from such distributions or gains.
Information on the amount and tax character of distributions
The Funds will inform you of the amount of your ordinary income and capital gain dividends at the time they are paid, and will advise you of their tax status for federal income tax purposes shortly after the end of each calendar year. If you have not held Fund shares for a full year, a Fund may designate and distribute to you, as ordinary income, qualified dividends or capital gains, and in the case of non-U.S. shareholders, a Fund may further designate and distribute as interest-related dividends and short-term capital gain dividends, a percentage of income that may not be equal to the actual amount of this type of income earned during the period of your investment in the Fund. Taxable distributions declared by a Fund in December but paid in January are taxable to you as if they were paid in December.
Election to be taxed as a regulated investment company
Each Fund intends to elect or has elected to be treated as a regulated investment company under Subchapter M of the Code. As a regulated investment company, a Fund generally pays no federal income tax on the income and gain it distributes to you. The Trust's Board of Trustees reserves the right not to maintain the qualification of each Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders. In such a case, the Fund would be subject to federal, and possibly state, corporate taxes on its taxable income and gain, and distributions to you would be taxed as dividend income to the extent of the Fund's earnings and profits.
In order to qualify as a regulated investment company for federal income tax purposes, each Fund must meet certain specific requirements, including:
(i) the Fund must maintain a diversified Fund of securities, wherein no security, including the securities of a qualified publicly traded partnership (other than U.S. government securities and securities of other regulated investment companies) can exceed 25% of the Fund's total assets, and, with respect to 50% of the Fund's total assets, no investment (other than cash and cash items, U.S. government securities and securities of other regulated investment companies) can exceed 5% of the Fund's total assets or 10% of the outstanding voting securities of the issuer;
(ii) the Fund must derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities, or currencies, and net income derived from an interest in a qualified publicly traded partnership; and
(iii) the Fund must distribute to its shareholders at least 90% of its investment company taxable income and net tax-exempt income for each of its fiscal years.
Excise tax distribution requirements
To avoid federal excise taxes, the Code requires each Fund to distribute to you by December 31 of each year, at a minimum, the following amounts: 98% of its taxable ordinary income earned during the calendar year; 98% of its capital gain net income earned during the twelve-month period ending October 31; and 100% of any undistributed amounts from the prior year. Each Fund intends to declare and pay these distributions in December (or to pay them in January, in which case you must treat them as received in December) but can give no assurances that its distributions will be sufficient to eliminate all taxes.
Sales of Fund shares
Sales and exchanges of Fund shares are taxable transactions for federal and state income tax purposes. If you sell your Fund shares, whether you receive cash or exchange them for shares of a different Gartmore Fund, the IRS requires you to report any gain or loss on your sale or exchange. If you owned your shares as a capital asset, any gain or loss that you realize generally is a capital gain or loss, and is long-term or short-term, depending on how long you owned your shares. Any redemption/exchange fees you incur on shares redeemed or exchanged within 90
days after the date they were purchased will decrease the amount of any capital gain (or increase any capital loss) you realize on the sale or exchange.
Sales at a loss within six months of purchase. Any loss incurred on the sale or exchange of Fund shares owned for six months or less is treated as a long-term capital loss to the extent of any long-term capital gains distributed to you by the Fund on those shares.
Deferral of basis - Class A shares only . In reporting gain or loss on the sale of your Fund shares, you may be required to adjust your basis in the shares you sell under the following circumstances:
IF:
o In your original purchase of Fund shares, you received a reinvestment right (the right to reinvest your sales proceeds at a reduced or with no sales charge), and
o You sell some or all of your original shares within 90 days of their purchase, and
o You reinvest the sales proceeds in the Fund or in another Gartmore Fund, and the sales charge that would otherwise apply is reduced or eliminated;
THEN:
In reporting any gain or loss on your sale, all or a portion of the sales charge that you paid for your original shares is excluded from your tax basis in the shares sold and added to your tax basis in the new shares.
Wash sales. All or a portion of any loss that you realize on the sale of your Fund shares is disallowed to the extent that you buy other shares in the Fund within 30 days before or after your sale. Any loss disallowed under these rules is added to your tax basis in the new shares.
U.S. government securities
The income earned on certain U.S. government securities is exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on these securities, subject in some states to minimum investment or reporting requirements that must be met by a Fund. The income on Fund investments in certain securities, such as repurchase agreements, commercial paper and federal agency-backed obligations (e.g., Government National Mortgage Association (Ginnie Mae) or Federal National Mortgage Association (Fannie Mae) securities), generally does not qualify for tax-free treatment. The rules on exclusion of this income are different for corporations.
Qualified dividend income for individuals
For individual shareholders, a portion of the dividends paid by a Fund may be qualified dividends eligible for taxation at long-term capital gain rates. This reduced rate generally is available for dividends paid by a Fund out of dividends earned on the Fund's investment in stocks of domestic corporations and qualified foreign corporations. Dividends from PFICs are not eligible to be treated as qualified dividend income.
Both the Fund and the investor must meet certain holding period requirements to qualify Fund dividends for this treatment. Specifically, a Fund must hold the stock for at least 61 days during the 121-day period beginning 60 days before the stock becomes ex-dividend. Similarly, investors must hold their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund distribution goes ex-dividend. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of stock is not entitled to receive the dividend payment. When counting the number of days you held your Fund shares, include the day you sold your shares but not the day you acquired these shares.
While the income received in the form of a qualified dividend is taxed at the same rates as long-term capital gains, such income will not be considered as a long-term capital gain for other federal income tax purposes. For example, you will not be allowed to offset your long-term capital losses against qualified dividend income on your federal income tax return. Any qualified dividend income that you elect to be taxed at these reduced rates also cannot be used as investment income in determining your allowable investment interest expense. For other
limitations on the amount of or use of qualified dividend income on your income tax return, please contact your personal tax advisor.
After the close of its fiscal year, a Fund will designate the portion of its ordinary dividend income that meets the definition of qualified dividend income taxable at reduced rates. If 95% or more of a Fund's income is from qualified sources, it will be allowed to designate 100% of its ordinary income distributions as qualified dividend income.
Dividends-Received Deduction for Corporations
The portion of dividends paid by a Fund that qualifies for the corporate dividends-received deduction will be designated each year in a notice mailed to the Fund's shareholders, and cannot exceed the gross amount of dividends received by the Fund from domestic (U.S.) corporations that would have qualified for the dividends-received deduction in the hands of the Fund if the Fund was a regular corporation.
The availability of the dividends-received deduction is subject to certain holding period and debt financing restrictions imposed under the Code on the corporation claiming the deduction. The amount that a Fund may designate as eligible for the dividends-received deduction will be reduced or eliminated if the shares on which the dividends earned by the Fund were debt-financed or held by the Fund for less than a minimum period of time, generally 46 days during a 91-day period beginning 45 days before the stock becomes ex-dividend. Similarly, if your Fund shares are debt-financed or held by you for less than a 46-day period then the dividends-received deduction for Fund dividends on your shares may also be reduced or eliminated. Even if designated as dividends eligible for the dividends-received deduction, all dividends (including any deducted portion) must be included in your alternative minimum taxable income calculation.
Investment in complex securities
Each Fund may invest in complex securities (e.g., futures, options, forward currency contracts, short-sales, PFICs, etc.) that may be subject to numerous special and complex tax rules. These rules could affect whether gain or loss recognized by a Fund is treated as ordinary or capital, or as interest or dividend income. These rules could also accelerate the recognition of income to a Fund (possibly causing the Fund to sell securities to raise the cash for necessary distributions). These rules could defer a Fund's ability to recognize a loss, and, in limited cases, subject the Fund to U.S. federal income tax on income from certain foreign securities. These rules could, therefore, affect the amount, timing, or character of the income distributed to you by a Fund.
Derivatives. Each Fund is permitted to invest in a options, futures contracts, options on futures contracts, stock index options and forward currency contracts to hedge a Fund's portfolio or for any other permissible purposes consistent with that Fund's investment objective. If a Fund makes these investments, it could be required to mark-to-market these contracts and realize any unrealized gains and losses at its fiscal year end even though it continues to hold the contracts. Under these rules, gains or losses on the contracts generally would be treated as 60% long-term and 40% short-term gains or losses, but gains or losses on certain foreign currency contracts would be treated as ordinary income or losses. In determining its net income for excise tax purposes, the Fund also would be required to mark-to-market these contracts annually as of October 31 (for capital gain net income and ordinary income arising from certain foreign currency contracts), and to realize and distribute any resulting income and gains.
Constructive Sales. A Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize gain, but not loss, on the position.
Tax Straddles. A Fund's investment in options, futures, forwards, or foreign currency contracts (or in substantially similar or related property) in connection with certain hedging transactions could cause it to hold offsetting positions in securities. If a Fund's risk of loss with respect to specific securities in its portfolio is substantially diminished by the fact that it holds other securities, the Fund could be deemed to have entered into a tax "straddle" or to hold a "successor position" that would require any loss realized by it to be deferred for tax purposes.
Short sales and securities lending transactions. A Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize gain, but not loss, on the position. Additionally, a Fund's entry into securities lending transactions may cause the replacement income earned on the loaned securities to fall outside of the definition of qualified dividend income. This replacement income generally will not be eligible for reduced rates of taxation on qualified dividend income, and, to the extent that debt securities are loaned, will generally not qualify as qualified interest income for foreign withholding tax purposes.
Credit Default Swap Agreements. Each Fund may enter into credit default swap agreements. The rules governing the tax aspects of swap agreements that provide for contingent nonperiodic payments of this type are in a developing stage and are not entirely clear in certain aspects. Accordingly, while a Fund intends to account for such transactions in a manner deemed to be appropriate, the IRS might not accept such treatment. The Funds intend to monitor developments in this area.
Investment in REMIC residual interests (excess inclusion income). A Fund may invest in residual interests in certain mortgage pooling vehicles formed as real estate mortgage investment conduits ("REMICs"). The portion of the Fund's income received from REMIC residual interests, either directly or through an investment in a REIT that holds such interests or qualifies as a taxable mortgage pool (such income is referred to in the Code as "excess inclusion income") generally is required to be allocated by the Fund to its shareholders in proportion to the dividends paid to such shareholders with the same consequences as if the shareholders received the excess inclusion income directly.
Under these rules, a Fund will be taxed at the highest corporate income tax rate on its excess inclusion income that is allocable to the percentage of its shares held in record name by "disqualified organizations," which are generally certain cooperatives, governmental entities and tax-exempt organizations that are exempt from tax on unrelated business taxable income. To the extent that Fund shares owned by "disqualified organizations" are held in record name by a broker/dealer or other nominee, the broker/dealer or other nominee would be liable for the corporate level tax on the portion of the Fund's excess inclusion income allocable to Fund shares held by the broker/dealer or other nominee on behalf of the "disqualified organizations." The Fund expects that disqualified organizations own their shares. Because this tax is imposed at the Fund level, all shareholders, including shareholders that are not disqualified organizations, will bear a portion of the tax cost associated with the Fund's receipt of excess inclusion income. However, to the extent permissible under the 1940 Act, regulated investment companies such as the Fund are permitted under Treasury Regulations to specially allocate this tax expense to the disqualified organizations to which it is attributable, without a concern that such an allocation will constitute a preferential dividend.
Investments in securities of uncertain tax character. Each Fund may invest in securities the U.S. Federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by a Fund, it could affect the timing or character of income recognized by the Fund, requiring the Fund to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Code.
Backup Withholding.
By law, a Fund must withhold a portion of your taxable dividends and sales proceeds unless you:
o provide your correct social security or taxpayer identification number,
o certify that this number is correct,
o certify that you are not subject to backup withholding, and
o certify that you are a U.S. person (including a U.S. resident alien).
A Fund also must withhold if the IRS instructs it to do so. When withholding is required, the amount will be 28% of any dividends or proceeds paid. The special U.S. tax certification requirements applicable to non-U.S. investors are described under the "Non-U.S. Investors" heading below.
Non-U.S. Investors.
Non-U.S. Investors may be subject to U.S. withholding and estate tax and are subject to special U.S. tax certification requirements. Foreign persons should consult their tax advisors about the applicability of U.S. tax withholding and the use of the appropriate forms to certify their status.
In general. The United States imposes a flat 30% withholding tax (or lower treaty rate) on U.S. source dividends.
Capital Gain Dividends & Short-Term Capital Gain Dividends. In general, capital gain dividends paid by the Fund from either long-term or short-term capital gains (other than gain realized on disposition of U.S. real property interests) are not subject to U.S. withholding tax unless you are a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year.
Interest-Related Dividends. Interest-related dividends paid by a Fund from qualified interest income are not subject to U.S. withholding tax. "Qualified interest income" includes, in general, U.S. source (1) bank deposit interest, (2) short-term original discount and (3) interest (including original issue discount, market discount, or acquisition discount) on an obligation which is in registered form, unless it is earned on an obligation issued by a corporation or partnership in which the Fund is a 10-percent shareholder or is contingent interest, and (4) any interest-related dividend from another regulated investment company. While each Fund makes every effort to disclose any amounts of interest-related dividends distributed to its non-U.S. shareholders, intermediaries who have
assumed tax reporting responsibilities on these distributions may not have fully developed systems that will allow these tax withholding benefits to be passed through to them.
Sunset Date for Short-Term Capital Gain Dividends and Interest-Related Dividends. The exemption from withholding for short-term capital gain dividends and interest-related dividends paid by the Fund is effective for dividends paid with respect to taxable years of a Fund beginning after December 31, 2004 and before January 1, 2008, unless such exemption is extended or made permanent.
Other. Ordinary dividends paid by a Fund to non-U.S. investors on the income earned on portfolio investments in (i) the stock of domestic and foreign corporations, and (ii) the debt of foreign issuers continue to be subject to U.S. withholding tax. If you hold your Fund shares in connection with a U.S. trade or business, your income and gains will be considered effectively connected income and taxed in the U.S. on a net basis, in which case you may be required to file a nonresident U.S. income tax return.
U.S. Estate Tax. A partial exemption from U.S estate tax may apply to stock in a Fund held by the estate of a nonresident decedent. The amount treated as exempt is based upon the proportion of the assets held by a Fund at the end of the quarter immediately preceding the decedent's death that are debt obligations, deposits, or other property that would generally be treated as situated outside the United States if held directly by the estate. This provision applies to decedents dying after December 31, 2004 and before January 1, 2008, unless such provision is extended or made permanent.
U.S Tax Certification Rules. Special U.S. tax certification requirements apply to non-U.S. shareholders both to avoid U.S. back up withholding imposed at a rate of 28% and to obtain the benefits of any treaty between the United States and the shareholder's country of residence. In general, a non-U.S. shareholder must provide a Form W-8 BEN (or other applicable Form W-8) to establish that you are not a U.S. person, to claim that you are the beneficial owner of the income and, if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a country with which the United States has an income tax treaty. A Form W-8BEN provided without a U.S. taxpayer identification number will remain in effect for a period beginning on the date signed and ending on the last day of the third succeeding calendar year unless an earlier change of circumstances makes the information on the form incorrect.
This discussion of "Additional General Tax Information For The Funds" is not intended or written to be used as tax advice and does not purport to deal with all federal tax consequences applicable to all categories of investors, some of which may be subject to special rules. You should consult your own tax advisor regarding your particular circumstances before making an investment in either of the Funds.
MAJOR SHAREHOLDERS
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, each located at One Nationwide Plaza, Columbus, Ohio 43215 and Nationwide Life Insurance Company of America ("NLICA"), located at 1000 Chesterbrook Boulevard, Berwyn, Pennsylvania 19312, are wholly owned by Nationwide Financial Services, Inc. ("NFS"). Nationwide Life and Annuity Insurance Company of America, located at 300 Continental Drive, Newark, Delaware 19713, is wholly owned by NLICA. NFS, a holding company, has two classes of common stock outstanding with different voting rights enabling Nationwide Corporation (the holder of all outstanding Class B Common Stock) to control NFS. Nationwide Corporation is also a holding company in the Nationwide Insurance Enterprise. All of the common stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders.
As of October 31, 2006, the Trustees and Officers of the Trust as a group owned beneficially less than 1% of the shares of the Trust, and less than 1% of any class of shares of the Funds.
As of February 2, 2007, the following shareholders held five percent or greater of the shares of a class of a Fund:
----------------------------------------------------------------------------------------------------------------- GARTMORE MARKET NEUTRAL FUND CLASS A Number of Shares Percent of Class ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 100.508 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428--2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE MARKET NEUTRAL FUND CLASS B ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 100.328 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428--2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE MARKET NEUTRAL FUND CLASS C ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 100.328 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428--2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE MARKET NEUTRAL FUND INSTITUTIONAL CLASS ----------------------------------------------------------------------------------------------------------------- NATIONWIDE MUTUAL INSURANCE COMPANY 502986.957 45.16% ATTN KEVIN KING 1 NATIONWIDE PLZ 1-33-13 COLUMBUS OH 43215-2220 ----------------------------------------------------------------------------------------------------------------- GARTMORE AM SPECIALTY 248512.812 22.31% ASSET ALLOCATION FUND 3435 STELZER RD C/O MIKE LEONARD COLUMBUS OH 43219--6004 ----------------------------------------------------------------------------------------------------------------- GARTMORE AM MODERATE 177468.266 15.93% ASSET ALLOCATION FUND 3435 STELZER RD C/O MIKE LEONARD COLUMBUS OH 43219--6004 ----------------------------------------------------------------------------------------------------------------- GARTMORE AM MODERATELY AGGRESSIVE 133599.072 11.99% ASSET ALLOCATION FUND 3435 STELZER RD C/O MIKE LEONARD COLUMBUS OH 43219--6004 ----------------------------------------------------------------------------------------------------------------- GARTMORE MARKET NEUTRAL FUND CLASS R ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 100.418 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428--2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE MARKET NEUTRAL FUND INSTITUTIONAL SERVICE CLASS ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 100.598 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428--2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP CORE FUND CLASS A ----------------------------------------------------------------------------------------------------------------- OPPENHEIMER & CO. INC. 8387.698 37.90% 125 BROAD STREET 15TH FL NEW YORK NY 10004 ----------------------------------------------------------------------------------------------------------------- |
----------------------------------------------------------------------------------------------------------------- OPPENHEIMER & CO. INC. 5380.139 24.31% 125 BROAD STREET 15TH FL NEW YORK NY 10004 ----------------------------------------------------------------------------------------------------------------- PERSHING LLC 1 3412.248 15.42% PERSHING PLAZA 14TH FLOOR JERSEY CITY NJ 07399 ----------------------------------------------------------------------------------------------------------------- MORGAN KEEGAN & COMPANY, INC. 3164.557 14.30% MORGAN KEEGAN TOWER 18TH FLOOR 50 FRONT STREET MEMPHIS TN 38103 ----------------------------------------------------------------------------------------------------------------- OPPENHEIMER & CO. INC. 1687.288 7.62% 125 BROAD STREET 15TH FL NEW YORK NY 10004 ----------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP CORE FUND CLASS B ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 100 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP CORE FUND CLASS C ----------------------------------------------------------------------------------------------------------------- MERRILL LYNCH, PIERCE, FENNER & SMITH 3304.264 92.10% OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640 4800 DEER LAKE DRIVE EAST 3RD FLOOR JACKSONVILLE FL 32246 ----------------------------------------------------------------------------------------------------------------- FIRST CLEARING, LLC 183.556 5.12% 10750 WHEAT FIRST DRIVE GLEN ALLEN VA 23060 ----------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP CORE FUND INSTITUTIONAL CLASS ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 500532.653 100.00% SEED ACCOUNT ATTN MIKE POLICARPO 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP CORE FUND CLASS R ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS SEED ACCOUNT 100 100.00% ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 ----------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP CORE FUND INSTITUTIONAL SERVICE CLASS ----------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 100.107 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 ----------------------------------------------------------------------------------------------------------------- |
FINANCIAL STATEMENTS
The Report of Independent Registered Public Accounting Firm and Financial Statements for the Trust for the fiscal year ended October 31, 2006 in the Trust's Annual Report are incorporated herein by reference. Copies of the Trust's Annual Reports and Semi-Annual Reports are available without charge upon request by writing the Trust or by calling toll free 800-848-0920.
APPENDIX A
DEBT RATINGS
STANDARD & POOR'S DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB- Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
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SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. 'BB' indicates the least degree of speculation and 'C' the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB - Debt rated 'BB' is less vulnerable to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal
payments.
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B - Debt rated 'B' has a greater vulnerability to default than
obligations rated BB but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
CCC - Debt rated 'CCC' is currently vulnerable to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest
and repay principal.
CC - Debt rated 'CC' typically is currently highly vulnerable to
nonpayment.
C - Debt rated 'C' signifies that a bankruptcy petition has been filed,
but debt service payments are continued.
D - Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are
jeopardized.
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection
of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
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Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
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STATE AND MUNICIPAL NOTES
Excerpts from Moody's description of state and municipal note ratings:
MIG-1-- Notes bearing this designation are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing from established and board-based access to the market for
refinancing, or both.
MIG-2-- Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
MIG-3-- Notes bearing this designation are of favorable quality, with all
security elements accounted for but lacking the strength of the
preceding grade. Market access for refinancing, in particular, is
likely to be less well established.
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FITCH, INC. BOND RATINGS
Fitch, Inc. ("Fitch") investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered investment grade and representing the lowest
expectation of credit risk. The obligor has an exceptionally
strong capacity for timely payment of financial commitments, a
capacity that is highly unlikely to be adversely affected by
foreseeable events.
AA Bonds considered investment grade and of very high credit
quality. This rating indicates a very strong capacity for timely
payment of financial commitments, a capacity that is not
significantly vulnerable to foreseeable events.
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A Bonds considered investment grade and representing a low
expectation of credit risk. This rating indicates a strong
capacity for timely payment of financial commitments. This
capacity may, nevertheless, be more vulnerable to changes in
economic conditions or circumstances than long term debt with
higher ratings.
BBB Bonds considered to be in the lowest investment grade and
indicating that there is currently low expectation of credit
risk. The capacity for timely payment of financial commitments
is considered adequate, but adverse changes in economic
conditions and circumstances are more likely to impair this
capacity.
BB Bonds considered speculative. This rating indicates that there
is a possibility of credit risk developing, particularly as the
result of adverse economic changes over time; however, business
or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not
investment grade.
B Bonds considered highly speculative. This rating indicates that
significant credit risk is present, but a limited margin of
safety remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.
CCC, CC and C Bonds are considered a high default risk. Default is a real
possibility. Capacity for meeting financial commitments is
solely reliant upon sustained, favorable business or economic
developments. A 'CC' rating indicates that default of some kind
appears probable. 'C' rating signals imminent default.
DDD, DD and D Bonds are in default. Such bonds are not meeting current
obligations and are extremely speculative. 'DDD' designates the
highest potential for recovery of amounts outstanding on any
securities involved and 'D' represents the lowest potential for
recovery.
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SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from 'A-1' for the highest quality obligations to 'D' for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated 'A-1'.
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Issues rated 'B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.
D Debt rated 'D' is in payment default. the 'D' rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period.
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STANDARD & POOR'S NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating.
The following criteria will be used in making the assessment:
1. Amortization schedule - the larger the final maturity relative to other maturities, the more likely the issue is to be treated as a note.
2. Source of payment - the more the issue depends on the market for its refinancing, the more likely it is to be considered a note.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong capacity to pay principal and interest are given
a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
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MOODY'S SHORT-TERM RATINGS
Moody's short-term debt ratings are opinions on the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged investment grade, to indicate the relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior capacity for repayment of senior short-term debt obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: (I) leading market positions in well established industries, (II) high rates of return on funds employed, (III) conservative capitalization structures with moderate reliance on debt and ample asset protection, (IV) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (V) well established access to a range of financial markets and assured sources of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the prime rating categories.
MOODY'S NOTE RATINGS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
SG This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
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FITCH'S SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+ Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
APPENDIX B
PROXY VOTING GUIDELINES SUMMARIES
GARTMORE MUTUAL FUNDS CAPITAL TRUST
GENERAL
The Board of Trustees of the Funds has confirmed the continued delegation of the authority to vote proxies relating to the securities held in the portfolios of the Funds to the Fund's investment adviser or sub-adviser, as the case may be, after each such Board reviewed and considered the proxy voting policies and procedures used by each of the investment advisers and sub-advisers of the Funds, some of which advisers and sub-advisers use an independent service provider, as described below.
Gartmore Mutual Fund Capital Trust. ( "GMFCT") is an investment adviser that is registered with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act"). GMFCT provides investment advisory services to various types of clients, including registered and unregistered investment companies, collective trusts, institutional separate accounts, wrap accounts, insurance general accounts, charitable endowments, Taft-Hartley Act plans, ERISA plans, state-sponsored funds, managed separate accounts, and individuals (hereinafter referred to collectively as the "Clients").
Voting proxies that are received in connection with underlying portfolio securities held by Clients is an important element of the portfolio management services that GMFCT performs for Clients. GMFCT's goal in performing this service is to make proxy voting decisions: (i) to vote or not to vote proxies in a manner that serves the best economic interests of advisory clients; and (ii) that avoid the influence of conflicts of interest. To implement this goal, GMFCT has adopted proxy voting guidelines (the "GMFCT Proxy Voting Guidelines") to assist GMFCT in making proxy voting decisions and in developing procedures for effecting those decisions. The GMFCT Proxy Voting Guidelines are designed to ensure that where GMFCT has the authority to vote proxies, all legal, fiduciary, and contractual obligations will be met.
The GMFCT Proxy Voting Policies address a wide variety of individual topics, including, among other matters, shareholder voting rights, anti-takeover defenses, board structures and the election of directors, executive and director compensation, reorganizations, mergers, and various shareholder proposals. The proxy voting records of the Funds are available to shareholders on the SEC's website.
HOW PROXIES ARE VOTED
GMFCT has delegated to Institutional Shareholder Services ("ISS"), an independent service provider, the administration of proxy voting for Client portfolio securities directly managed by GMFCT. ISS, a Delaware corporation, provides proxy-voting services to many asset managers on a global basis. A committee of GMFCT personnel has reviewed, and will continue to review annually, GMFCT's relationship with ISS and the quality and effectiveness of the various services provided by ISS.
Specifically, ISS assists GMFCT in the proxy voting and corporate governance oversight process by developing and updating the "ISS Proxy Voting Guidelines," which are incorporated into the GMFCT Proxy Voting Guidelines, and by providing research and analysis, recommendations regarding votes, operational implementation, and recordkeeping and reporting services. GMFCT's decision to retain ISS is based principally on the view that the services that ISS provides, subject to oversight by GMFCT, generally will result in proxy voting decisions which serve the best economic interests of Clients. GMFCT has reviewed, analyzed, and determined that the ISS Proxy Voting Guidelines are consistent with the views of GMFCT on the various types of proxy proposals. When the ISS Proxy Voting Guidelines do not cover a specific proxy issue and ISS does not provide a recommendation: (i) ISS will notify GMFCT; and (ii) GMFCT will use its best judgment in voting proxies on behalf of the Clients. A summary of the ISS Proxy Voting Guidelines is set forth below.
CONFLICTS OF INTEREST
GMFCT and its subsidiaries do not engage in investment banking, administration or management of corporate retirement plans, or any other activity that is likely to create a potential conflict of interest. In addition, because Client proxies are voted by ISS pursuant to the pre-determined ISS Proxy Voting Guidelines, GMFCT generally does not make an actual determination of how to vote a particular proxy, and, therefore, proxies voted on behalf of the Clients do not reflect any conflict of interest. Nevertheless, the GMFCT Proxy Voting Guidelines address the possibility of such a conflict of interest arising.
The GMFCT Proxy Voting Guidelines provide that, if a proxy proposal were to create a conflict of interest between the interests of a Client and those of GMFCT (or between a Client and those of any of GMFCT's affiliates, including Gartmore Distribution Services, Inc., and Nationwide), then the proxy should be voted strictly in conformity with the recommendation of ISS. To monitor compliance with this policy, any proposed or actual deviation from a recommendation of ISS must be reported to the chief counsel for GMFCT. The chief counsel for GMFCT then will provide guidance concerning the proposed deviation and whether a deviation presents any potential conflict of interest. If GMFCT then casts a proxy vote that deviates from an ISS recommendation, the affected Client (or other appropriate Client authority) will be given a report of this deviation.
CIRCUMSTANCES UNDER WHICH PROXIES WILL NOT BE VOTED
GMFCT, through ISS, shall attempt to process every vote for all domestic and foreign proxies that GMFCT receives; however, there may be cases in which GMFCT will not process a proxy because it is impractical or too expensive to do so. For example, GMFCT will not process a proxy in connection with a foreign security if the cost of voting a foreign proxy outweighs the benefit of voting the foreign proxy, when GMFCT has not been given enough time to process the vote, or when a sell order for the foreign security is outstanding and proxy voting would impede the sale of the foreign security. Also, GMFCT generally will not seek to recall the securities on loan for the purpose of voting the securities.
DELEGATION OF PROXY VOTING TO SUB-ADVISERS TO FUNDS
For any Fund, or portion of a Fund that is directly managed by a sub-adviser (other than GMFCT), the Trustees of the Fund and GMFCT have delegated proxy voting authority to that sub-adviser. Each sub-adviser has provided its proxy voting policies to the Board of Trustees of the Fund and GMFCT for their respective review and these proxy voting policies are described below. Each sub-adviser is required (1) to represent quarterly to GMFCT that all proxies of the Fund(s) advised by this sub-adviser were voted in accordance with the sub-adviser's proxy voting policies as provided to GMFCT and (2) to confirm that there have been no material changes to the sub-adviser's proxy voting policies.
INSTITUTIONAL SHAREHOLDER SERVICES ("ISS")
1. AUDITORS
Vote FOR proposals to ratify auditors, unless any of the following apply:
o An auditor has a financial interest in or association with the company, and is therefore not independent
o Fees for non-audit services are excessive, or
o There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position.
2. BOARD OF DIRECTORS
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes on director nominees should be made on a CASE-BY-CASE basis, examining the following factors: independence of the board and key board committees, attendance at board meetings, corporate governance
provisions and takeover activity, long-term company performance, responsiveness to shareholder proposals, any egregious board actions, and any excessive non-audit fees or other potential auditor conflicts.
CLASSIFICATION/DECLASSIFICATION OF THE BOARD
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors annually.
INDEPENDENT CHAIRMAN (SEPARATE CHAIRMAN/CEO)
Vote on a CASE-BY-CASE basis shareholder proposals requiring that the positions of chairman and CEO be held separately. Because some companies have governance structures in place that counterbalance a combined position, certain factors should be taken into account in determining whether the proposal warrants support. These factors include the presence of a lead director, board and committee independence, governance guidelines, company performance, and annual review by outside directors of CEO pay.
MAJORITY OF INDEPENDENT DIRECTORS/ESTABLISHMENT OF COMMITTEES VOTE FOR SHAREHOLDER PROPOSALS ASKING THAT A MAJORITY OR MORE OF DIRECTORS BE INDEPENDENT UNLESS THE BOARD COMPOSITION ALREADY MEETS THE PROPOSED THRESHOLD BY ISS'S DEFINITION OF INDEPENDENCE.
VOTE FOR SHAREHOLDER PROPOSALS ASKING THAT BOARD AUDIT, COMPENSATION, AND/OR NOMINATING COMMITTEES ARE COMPOSED EXCLUSIVELY OF INDEPENDENT DIRECTORS IF THEY CURRENTLY DO NOT MEET THAT STANDARD.
3. SHAREHOLDER RIGHTS
SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written consent.
Shareholder Ability to Call Special Meetings
Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.
SUPERMAJORITY VOTE REQUIREMENTS
Vote AGAINST proposals to require a supermajority shareholder vote.
VOTE FOR PROPOSALS TO LOWER SUPERMAJORITY VOTE REQUIREMENTS.
CUMULATIVE VOTING
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company's other governance provisions.
CONFIDENTIAL VOTING
Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents will not agree, the confidential voting policy is waived.
Vote FOR management proposals to adopt confidential voting.
4. PROXY CONTESTS
VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis, considering the factors that include the long-term financial performance, management's track record, qualifications of director nominees (both slates), and an evaluation of what each side is offering shareholders.
REIMBURSING PROXY SOLICITATION EXPENSES
Vote CASE-BY-CASE. Where ISS recommends in favor of the dissidents, we also recommend voting for reimbursing proxy solicitation expenses.
5. POISON PILLS
Vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals to redeem a company's poison pill and management proposals to ratify a poison pill.
6. MERGERS AND CORPORATE RESTRUCTURINGS
Vote CASE-BY-CASE on mergers and corporate restructurings based on such features as the fairness opinion, pricing, strategic rationale, and the negotiating process.
7. REINCORPORATION PROPOSALS
PROPOSALS TO CHANGE A COMPANY'S STATE OF INCORPORATION SHOULD BE EVALUATED ON A CASE-BY-CASE BASIS, GIVING CONSIDERATION TO BOTH FINANCIAL AND CORPORATE GOVERNANCE CONCERNS, INCLUDING THE REASONS FOR REINCORPORATING, A COMPARISON OF THE GOVERNANCE PROVISIONS, AND A COMPARISON OF THE JURISDICTIONAL LAWS. VOTE FOR REINCORPORATION WHEN THE ECONOMIC FACTORS OUTWEIGH ANY NEUTRAL OR NEGATIVE GOVERNANCE CHANGES.
8. CAPITAL STRUCTURE
COMMON STOCK AUTHORIZATION
Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis using a model developed by ISS.
Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain.
DUAL-CLASS STOCK
Vote AGAINST proposals to create a new class of common stock with superior voting rights.
Vote FOR proposals to create a new class of nonvoting or subvoting common stock if:
o It is intended for financing purposes with minimal or no dilution to current shareholders
o It is not designed to preserve the voting power of an insider or significant shareholder
9. EXECUTIVE AND DIRECTOR COMPENSATION
Votes with respect to compensation plans should be determined on a CASE-BY-CASE basis. Our methodology for reviewing compensation plans primarily focuses on the transfer of shareholder wealth (the dollar cost of pay plans to shareholders instead of simply focusing on voting power dilution). Using the expanded compensation data disclosed
under the SEC's rules, ISS will value every award type. ISS will include in its analyses an estimated dollar cost for the proposed plan and all continuing plans. This cost, dilution to shareholders' equity, will also be expressed as a percentage figure for the transfer of shareholder wealth, and will be considered long with dilution to voting power. Once ISS determines the estimated cost of the plan, we compare it to a company-specific dilution cap.
Vote AGAINST equity plans that explicitly permit repricing or where the company has a history of repricing without shareholder approval.
MANAGEMENT PROPOSALS SEEKING APPROVAL TO REPRICE OPTIONS
Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following:
o Historic trading patterns
o Rationale for the repricing
o Value-for-value exchange
o Option vesting
o Term of the option
o Exercise price
o Participation
EMPLOYEE STOCK PURCHASE PLANS
Votes on employee stock purchase plans should be determined on a CASE-BY-CASE basis. Vote FOR employee stock purchase plans where all of the following apply:
o Purchase price is at least 85 percent of fair market value
o Offering period is 27 months or less, and
o Potential voting power dilution is ten percent or less.
Vote AGAINST employee stock purchase plans where any of the opposite conditions obtain.
SHAREHOLDER PROPOSALS ON COMPENSATION
Vote on a CASE-BY-CASE basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.
10. SOCIAL AND ENVIRONMENTAL ISSUES
These issues cover a wide range of topics, including consumer and public safety, environment and energy, general corporate issues, labor standards and human rights, military business, and workplace diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.
APPENDIX C
PORTFOLIO MANAGERS
INVESTMENTS IN EACH FUND
Dollar Range of Investments in
Name of Portfolio Manager Fund Name Each Fund as of October 31, 2006
------------------------- --------- --------------------------------
Joseph A. Cerniglia Gartmore Small Cap Core Fund None
Gartmore Market Neutral Fund None
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DESCRIPTION OF COMPENSATION STRUCTURE
Gartmore Mutual Funds Capital Trust ("GMFCT"):
GMFCT uses a compensation structure that is designed to attract and retain high-caliber investment professionals. Portfolio managers are compensated based primarily on the scale and complexity of their portfolio responsibilities and the total return performance of mutual funds, other managed pooled vehicles and managed separate accounts over which they have responsibility, versus appropriate peer groups and benchmarks. Portfolio manager compensation is reviewed annually and may be modified at any time as appropriate to adjust the factors used to determine bonuses or other compensation components.
Each portfolio manager is paid a base salary that GMFCT believes is industry competitive in light of the portfolio manager's experience and responsibility. In addition, each portfolio manager is eligible to receive an annual cash bonus that is derived from both quantitative and non-quantitative factors. Quantitative factors include fund/account performance and the financial performance of GMFCT or its parent company. The performance of the investment companies and other accounts each portfolio manager manages has a paramount impact on such person's compensation. For equity funds, pre-tax performance is measured, on a one-year basis, for each of the previous three calendar years, as compared to each such fund's or account's stated benchmark index. Pre-tax investment performance of most fixed-income portfolio managers is measured against a fund's stated benchmark over various time periods (e.g., on a one- or three-year basis, etc.). Additionally, mutual fund performance is measured against industry peer group rankings, which may provide performance rankings for both shorter periods as well as blended rankings for longer term performance. GMFCT uses this dual approach in order to create incentives for portfolio managers to sustain favorable results from one year to the next, and to reward managers for performance that has improved considerably during the recent period. Less significant in annual compensation determinations are subjective factors as identified by GMFCT's Chief Investment Officer or such other managers as may be appropriate.
The bonus determination components apply on an aggregate basis with respect to all accounts managed by a particular portfolio manager, including unregistered pooled investment vehicles and separate investment advisory accounts. The compensation of portfolio managers with other job responsibilities (such as managerial, providing analytical support for other accounts, etc.) will include consideration of the scope of such responsibilities and the managers' performance in meeting them. Funds and accounts that have performance-based advisory fees are not accorded disproportionate weightings in measuring aggregate portfolio manager performance.
Annual bonuses may vary significantly from one year to the next based on all of these factors. High performing portfolio managers may receive annual bonuses that constitute a substantial portion of their respective total compensation.
Portfolio managers also may be awarded unregistered restricted equity interests in a related NWD Investments entity that typically vest over time and are designed to create incentives to retain key talent and they are eligible to participate in a non-qualified deferred compensation plan sponsored by Nationwide Mutual Life Insurance Company, GMFCT's ultimate parent company. Such plan affords participating U.S.-based employees the tax benefits of deferring the receipt of a portion of their cash compensation. Portfolio managers also may participate in benefit plans and programs available generally to all GMFCT employees.
OTHER MANAGED ACCOUNTS
The following chart summarizes information regarding accounts other than the Funds for which the portfolio manager has day-to-day management responsibilities. Accounts are grouped into the following three categories: (1) mutual funds; (2) other pooled investment vehicles; and (3) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is provided separately.
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Number of Accounts Managed by Each Portfolio Manager
Name of Portfolio Manager and Total Assets by Category as of October 31, 2006
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Joseph Cerniglia Mutual Funds: 5 accounts, $461,070,089 total assets
(Other Pooled Investment
Vehicles: 5 accounts, $2,846,752,535 total assets
Other Accounts: 1 account, $480,000 total assets
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POTENTIAL CONFLICTS OF INTEREST
Gartmore Mutual Fund Capital Trust ("GMFCT"):
It is possible that conflicts of interest may arise in connection with the portfolio managers' management of the Funds on the one hand and other accounts for which the portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Funds and other accounts he advises. In addition, due to differences in the investment strategies or restrictions between the Funds and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Funds. In some cases, another account managed by the same portfolio manager may compensate GMFCT or its affiliates based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, the portfolio manager will endeavor to exercise his discretion in a manner that he believes is equitable to all interested persons. The Trust has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
STATEMENT OF ADDITIONAL INFORMATION
February 28, 2007
GARTMORE MUTUAL FUNDS
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND
GARTMORE SMALL CAP VALUE FUND
Gartmore Mutual Funds (the "Trust"), a Delaware statutory trust, is a registered open-end, management investment company currently consisting of 49 series as of the date hereof. This Statement of Additional Information ("SAI") relates to two series of the Trust referenced above (each, a "Fund", or collectively, the "Funds").
This SAI is not a prospectus but is incorporated by reference into the prospectus for the Gartmore Small Cap Growth Opportunities Fund and the Gartmore Small Cap Value Fund dated February 28, 2007 (the "Prospectus"). It contains information in addition to and more detailed than that set forth in the Prospectus and should be read in conjunction with the Prospectus.
Terms not defined in this SAI have the meanings assigned to them in the Prospectus. The Prospectus may be obtained from Gartmore Mutual Funds, P.O. Box 182205, Columbus, Ohio 43218-2205, or by calling toll free 800-848-0920.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management plc (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
TABLE OF CONTENTS PAGE
----------------- ---- General Information and History........................................... 1 Additional Information on Portfolio Instruments and Investment Policies... 1 Description of Portfolio Instruments and Investment Policies.............. 3 Investment Restrictions................................................... 25 Disclosure of Portfolio Holdings.......................................... 26 Trustees and Officers of the Trust........................................ 28 Investment Advisory and Other Services.................................... 37 Brokerage Allocation...................................................... 44 Purchases, Redemptions and Pricing of Shares.............................. 46 Systematic Investment Strategies.......................................... 47 Investor Privileges....................................................... 48 Investor Services ........................................................ 50 Performance Advertising................................................... 51 Additional Information.................................................... 51 Additional General Tax Information........................................ 52 Major Shareholders........................................................ 58 Financial Statements...................................................... 60 Appendix A - Debt Ratings................................................. A-1 Appendix B - Proxy Voting Guidelines Summaries............................ B-1 Appendix C - Portfolio Manager............................................ C-1 |
GENERAL INFORMATION AND HISTORY
Gartmore Mutual Funds (the "Trust"), formerly Nationwide Mutual Funds (until January 25, 2002) and Nationwide Investing Foundation III (until March 1, 2000), is an open-end management investment company formed under the laws of the state of Delaware by a Declaration of Trust dated February 28, 2005. The Trust, originally organized as an Ohio business trust under the laws of the state of Ohio by a Declaration of Trust dated October 30, 1997, redomesticated as a Delaware statutory trust on or about February 28, 2005 in a reorganization approved by vote of the shareholders of the Ohio business trust in a shareholders' meeting on December 23, 2004. In the reorganization the Ohio business trust transferred all of its assets to the Trust in exchange for shares of the Trust and assumption by the Trust of all of the liabilities of the Ohio business trust. The Trust currently consists of 50 separate series, each with its own investment objective. Each Fund is a diversified fund as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
The Funds invest in a variety of securities and employ a number of investment techniques, which involve certain risks. The Prospectus for the Funds highlights the principal investment strategies, investment techniques and risks. This Statement of Additional Information ("SAI") contains additional information regarding both the principal and non-principal investment strategies of the Funds.
The following table sets forth additional information concerning permissible investments and techniques for the Fund. A "Y" in the table indicates that the Fund may invest in or follow the corresponding instrument or technique. An empty box indicates that the Fund does not intend to invest in or follow the corresponding instrument or technique. Please review the discussion in the Prospectus for further information regarding the investment objectives and policies of each Fund.
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Gartmore Small
Cap Growth
Opportunities Gartmore Small
Type of Investment or Technique Fund Cap Value Fund
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U.S. Common Stocks Y Y
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Preferred Stocks Y Y
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Small Company Stocks Y Y
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Special Situation Companies Y Y
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Illiquid Securities Y Y
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Restricted Securities Y Y
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When-Issued / Delayed-Delivery Securities Y Y
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Investment Companies Y Y
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Real Estate Investment Trusts (REITS) Y Y
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Securities Of Foreign Issuers Y Y
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Depositary Receipts Y Y
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Securities From Developing Countries/Emerging Markets Y Y
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---------------------------------------------------------------------------------------------- Convertible Securities Y Y ---------------------------------------------------------------------------------------------- Long-Term Debt ---------------------------------------------------------------------------------------------- Long-Term Debt When Originally Issued But With 397 Days Or Less Remaining To Maturity ---------------------------------------------------------------------------------------------- Short-Term Debt Y Y ---------------------------------------------------------------------------------------------- Floating And Variable Rate Securities Y Y ---------------------------------------------------------------------------------------------- Zero Coupon Securities ---------------------------------------------------------------------------------------------- Pay-In-Kind Bonds ---------------------------------------------------------------------------------------------- Deferred Payment Securities ---------------------------------------------------------------------------------------------- Non-Investment Grade Debt ---------------------------------------------------------------------------------------------- Loan Participations And Assignments Y Y ---------------------------------------------------------------------------------------------- Sovereign Debt (Foreign) (Denominated In U.S. $) ---------------------------------------------------------------------------------------------- Foreign Commercial Paper (Denominated In U.S. $) ---------------------------------------------------------------------------------------------- Duration ---------------------------------------------------------------------------------------------- U.S. Government Securities Y Y ---------------------------------------------------------------------------------------------- Money Market Instruments Y Y ---------------------------------------------------------------------------------------------- Mortgage-Backed Securities ---------------------------------------------------------------------------------------------- Stripped Mortgage Securities ---------------------------------------------------------------------------------------------- Collateralized Mortgage Obligations ---------------------------------------------------------------------------------------------- Mortgage Dollar Rolls ---------------------------------------------------------------------------------------------- Asset-Backed Securities ---------------------------------------------------------------------------------------------- Bank And/Or Savings And Loan Obligations ---------------------------------------------------------------------------------------------- Repurchase Agreements Y Y ---------------------------------------------------------------------------------------------- Derivatives Y Y ---------------------------------------------------------------------------------------------- Reverse Repurchase Agreements Y Y ---------------------------------------------------------------------------------------------- Warrants Y Y ---------------------------------------------------------------------------------------------- Futures Y Y ---------------------------------------------------------------------------------------------- Options Y Y ---------------------------------------------------------------------------------------------- Foreign Currencies Y Y ---------------------------------------------------------------------------------------------- Forward Currency Contracts Y Y ---------------------------------------------------------------------------------------------- Borrowing Money Y Y ---------------------------------------------------------------------------------------------- Lending Portfolio Securities Y Y ---------------------------------------------------------------------------------------------- Investment Of Securities Lending Collateral Y Y ---------------------------------------------------------------------------------------------- Short Sales Y Y ---------------------------------------------------------------------------------------------- Participation Interests ---------------------------------------------------------------------------------------------- Swap Agreements Y Y ---------------------------------------------------------------------------------------------- Credit Default Swaps ---------------------------------------------------------------------------------------------- Wrap Contracts ---------------------------------------------------------------------------------------------- |
---------------------------------------------------------------------------------------------- Indexed Securities Y Y ---------------------------------------------------------------------------------------------- Strip Bonds ---------------------------------------------------------------------------------------------- Put Bonds ---------------------------------------------------------------------------------------------- Private Activity And Industrial Development Bonds ---------------------------------------------------------------------------------------------- Custodial Receipts ---------------------------------------------------------------------------------------------- Nationwide Contract ---------------------------------------------------------------------------------------------- Extendable Commercial Notes ---------------------------------------------------------------------------------------------- Standby Commitment Agreements ---------------------------------------------------------------------------------------------- Municipal Securities ---------------------------------------------------------------------------------------------- Equity Linked Notes ---------------------------------------------------------------------------------------------- Exchange Traded Funds ---------------------------------------------------------------------------------------------- |
DESCRIPTION OF PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
DEBT OBLIGATIONS
Debt obligations are subject to the risk of an issuer's inability to meet principal and interest payments on its obligations when due ("credit risk") and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, and general market liquidity. Lower-rated securities are more likely to react to developments affecting these risks than are more highly rated securities, which react primarily to movements in the general level of interest rates. Although the fluctuation in the price of debt securities is normally less than that of common stocks, in the past there have been extended periods of cyclical increases in interest rates that have caused significant declines in the price of debt securities in general and have caused the effective maturity of securities with prepayment features to be extended, thus effectively converting short or intermediate-term securities (which tend to be less volatile in price) into long term securities (which tend to be more volatile in price).
Ratings as Investment Criteria. High-quality, medium-quality and non-investment grade debt obligations are characterized as such based on their ratings by nationally recognized statistical rating organizations ("NRSROs"), such as Standard & Poor's Rating Group ("Standard & Poor's") or Moody's Investor Services ("Moody's"). In general, the ratings of NRSROs represent the opinions of these agencies as to the quality of securities that they rate. Such ratings, however, are relative and subjective, and are not absolute standards of quality and do not evaluate the market value risk of the securities. These ratings are used by a Fund as initial criteria for the selection of portfolio securities, but the Funds also rely upon the independent advice of the Funds' adviser to evaluate potential investments. This is particularly important for lower-quality securities. Among the factors that will be considered is the long-term ability of the issuer to pay principal and interest and general economic trends, as well as an issuer's capital structure, existing debt and earnings history. The Appendix to this SAI contains further information about the rating categories of NRSROs and their significance.
Subsequent to its purchase by a Fund, an issuer of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. In addition, it is possible that an NRSRO might not change its rating of a particular issuer to reflect subsequent events. None of these events generally will require sale of such securities, but a Fund's adviser will consider such events in its determination of whether a Fund should continue to hold the securities.
In addition, to the extent that the ratings change as a result of changes in a NRSRO or its rating systems, or due to a corporate reorganization, the Funds will attempt to use comparable ratings as standards for its investments in accordance with its investment objective and policies.
Medium-Quality Securities. The Funds anticipate investing in medium-quality obligations, which are obligations rated in the fourth highest rating category by any NRSRO. Medium-quality securities, although considered investment-grade, may have some speculative characteristics and may be subject to greater fluctuations in value than higher-rated securities. In addition, the issuers of medium-quality securities may be more vulnerable to adverse economic conditions or changing circumstances than issuers of higher-rated securities.
Lower-Quality (High-Risk) Securities. Non-investment grade debt or lower-quality/rated securities (hereinafter referred to as "lower-quality securities") include (i) bonds rated as low as C by Moody's, Standard & Poor's, or Fitch, Inc. ("Fitch"), (ii) commercial paper rated as low as C by Standard & Poor's, Not Prime by Moody's or Fitch 4 by Fitch; and (iii) unrated debt securities of comparable quality. Lower-quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. There is more risk associated with these investments because of reduced creditworthiness and increased risk of default. Under NRSRO guidelines, lower-quality securities and comparable unrated securities will likely have some quality and protective characteristics that are outweighed by large uncertainties or major risk exposures to adverse conditions. Lower-quality securities are considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default or to be in default, to be unlikely to have the capacity to make required interest payments and repay principal when due in the event of adverse business, financial or economic conditions, or to be in default or not current in the payment of interest or principal. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below.
Effect of Interest Rates and Economic Changes. Interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality and comparable unrated securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations may also be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities also because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower-quality or comparable unrated security defaulted, the Fund might incur additional expenses to seek recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of these securities and thus in the Fund's net asset value.
As previously stated, the value of a lower-quality or comparable unrated security will generally decrease in a rising interest rate market, and accordingly so will a Fund's net asset value. If a Fund experiences unexpected net redemptions in such a market, it may be forced to liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of lower-quality and comparable unrated securities (discussed below), a Fund may be forced to liquidate these securities at a substantial discount which would result in a lower rate of return to the Fund.
Payment Expectations. Lower-quality and comparable unrated securities typically contain redemption, call or prepayment provisions which permit the issuer of such securities containing such provisions to, at its discretion, redeem the securities. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities at a lower interest rate. To the extent an issuer is able to refinance the securities, or otherwise redeem them, a Fund may have to replace the securities with a lower yielding security, which would result in a lower return for the Fund.
Liquidity and Valuation. The Funds may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower-quality and comparable unrated securities, there may be no established retail secondary market for many of these securities. The Funds anticipate that such securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. As a result, a Fund's net asset value and ability to dispose of particular securities, when necessary to meet the Fund's liquidity needs or in response to a specific economic event, may be impacted. The lack of a liquid secondary market for certain securities may also make it more difficult for a Fund to obtain accurate market quotations for purposes of valuing the Fund's portfolio. Market quotations are generally available on many lower quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of lower quality and comparable unrated securities, especially in a thinly traded market.
- U.S. Government Securities. U.S. government securities are issued or guaranteed by the U.S. government or its agencies or instrumentalities. Securities issued by the U.S. government include U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities issued by government agencies or instrumentalities include obligations of the following:
- The Federal Housing Administration and the Farmers Home Administration;
- The Government National Mortgage Association ("GNMA"), including GNMA pass-through certificates, which are backed by the full faith and credit of the United States government;
- The Federal Home Loan Banks, whose securities are supported only by the credit of such agency;
- The Federal Farm Credit Banks, government-sponsored institutions that consolidate the financing activities of the Federal Land Banks, the Federal Intermediate Credit Banks and the Banks for Cooperatives; and
- The Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA"), whose securities are supported only by the credit of such agencies and are not guaranteed by the U.S. government. However, the Secretary of the Treasury has the authority to support FHLMC and FNMA by purchasing limited amounts of their respective obligations.
The U.S. government and its agencies and instrumentalities do not guarantee the market value of their securities; consequently, the value of such securities will fluctuate.
The Federal Reserve creates STRIPS (Separate Trading of Registered Interest and Principal of Securities) by separating the coupon payments and the principal payment from an outstanding Treasury security and selling them as individual securities. To the extent the Fund purchases the principal portion of STRIPS, the Fund will not receive regular interest payments. Instead STRIPS are sold at a deep discount from their face value. Because the principal portion of the STRIPS does not pay current income, its price can be volatile when interest rates change. In calculating their dividends, the Fund take into account as income a portion of the difference between the principal portion of a STRIPS' purchase price and its face value.
Brady Bonds. Brady Bonds are debt securities, generally denominated in U.S. dollars, issued under the framework of the Brady Plan. The Brady Plan is an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. In restructuring its external debt under the Brady Plan framework, a debtor nation negotiates with its existing bank lenders as well as multilateral institutions such as the International Bank for Reconstruction and Development (the "World Bank") and the International Monetary Fund (the "IMF"). The Brady Plan framework, as it has developed, contemplates the exchange of external commercial bank debt for newly issued bonds known as "Brady Bonds." Brady Bonds may also be issued in respect of new money being advanced by existing lenders in connection with the debt restructuring. The World Bank and/or the IMF support the restructuring by providing funds pursuant to loan agreements or other arrangements that enable the debtor nation to collateralize the new Brady Bonds or to repurchase outstanding bank debt at a discount. Under these arrangements with the World Bank and/or the IMF, debtor nations have been required to agree to the implementation of certain domestic monetary and fiscal reforms. Such reforms have included the liberalization of trade and foreign investment, the privatization of state-owned enterprises and the setting of targets for public spending and borrowing. These policies and programs seek to promote the debtor country's economic growth and development. Investors should also recognize that the Brady Plan only sets forth general guiding principles for economic reform and debt reduction,
emphasizing that solutions must be negotiated on a case-by-case basis between debtor nations and their creditors. The Funds' adviser may believe that economic reforms undertaken by countries in connection with the issuance of Brady Bonds may make the debt of countries which have issued or have announced plans to issue Brady Bonds an attractive opportunity for investment. However, there can be no assurance that the adviser or the subadviser's expectations with respect to Brady Bonds will be realized.
Agreements implemented under the Brady Plan to date are designed to achieve debt and debt-service reduction through specific options negotiated by a debtor nation with its creditors. As a result, the financial packages offered by each country differ. The types of options have included the exchange of outstanding commercial bank debt for bonds issued at 100% of face value of such debt which carry a below-market stated rate of interest (generally known as par bonds), bonds issued at a discount from the face value of such debt (generally known as discount bonds), bonds bearing an interest rate which increases over time and bonds issued in exchange for the advancement of new money by existing lenders. Regardless of the stated face amount and stated interest rate of the various types of Brady Bonds, the applicable Funds will purchase Brady Bonds in secondary markets, as described below, in which the price and yield to the investor reflect market conditions at the time of purchase. Certain sovereign bonds are entitled to "value recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Certain Brady Bonds have been collateralized as to principal due date at maturity (typically 30 years from the date of issuance) by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of such Brady Bonds. The U.S. Treasury bonds purchased as collateral for such Brady Bonds are financed by the IMF, the World Bank and the debtor nations' reserves. In addition, interest payments on certain types of Brady Bonds may be collateralized by cash or high-grade securities in amounts that typically represent between 12 and 18 months of interest accruals on these instruments with the balance of the interest accruals being uncollateralized. In the event of a default with respect to collateralized Brady Bonds as a result of which the payment obligations of the issuer are accelerated, the U.S. Treasury zero coupon obligations held as collateral for the payment of principal will not be distributed to investors, nor will such obligations be sold and the proceeds distributed. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds, which will continue to be outstanding, at which time the fact amount of the collateral will equal the principal payments that would have then been due on the Brady Bonds in the normal course. However, in light of the residual risk of the Brady Bonds and, among other factors, the history of default with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds, investments in Brady Bonds are considered speculative. The Fund may purchase Brady Bonds with no or limited collateralization, and, for payment of interest and (except in the case of principal collateralized Brady Bonds) principal, will be relying primarily on the willingness and ability of the foreign government to make payment in accordance with the terms of the Brady Bonds.
Foreign Sovereign Debt. The Funds may invest in sovereign debt obligations issued by foreign governments. To the extent that the Funds invest in obligations issued by developing or emerging markets, these investments involve additional risks. Sovereign obligors in developing and emerging market countries are among the world's largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. These obligors have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiation new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit for finance interest payments. Holders of certain foreign sovereign debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the foreign sovereign debt securities in which the Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit which may adversely affect the Fund's holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants.
REPURCHASE AGREEMENTS
In connection with the purchase by a Fund of a repurchase agreement from member banks of the Federal Reserve System or certain non-bank dealers, the Funds' custodian, or a subcustodian, will have custody of, and will
hold in a segregated account, securities acquired by a Fund under such repurchase agreement. Repurchase agreements are contracts under which the buyer of a security simultaneously commits to resell the security to the seller at an agreed-upon price and date. Repurchase agreements are considered by the staff of the Securities and Exchange Commission (the "SEC") to be loans by the Funds. Repurchase agreements may be entered into with respect to securities of the type in which the Funds may invest or government securities regardless of their remaining maturities, and will require that additional securities be deposited with the Funds' custodian or subcustodian if the value of the securities purchased should decrease below their resale price. Repurchase agreements involve certain risks in the event of default or insolvency by the other party, including possible delays or restrictions upon the Funds' ability to dispose of the underlying securities, the risk of a possible decline in the value of the underlying securities during the period in which the Funds seek to assert its rights to them, the risk of incurring expenses associated with asserting those rights and the risk of losing all or part of the income from the repurchase agreement. The Funds' adviser or subadviser reviews the creditworthiness of those banks and non-bank dealers with which the Fund enters into repurchase agreements to evaluate these risks.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS
When securities are purchased on a "when-issued" basis or purchased for delayed delivery, then payment and delivery occur beyond the normal settlement date at a stated price and yield. When-issued transactions normally settle within 45 days. The payment obligation and the interest rate that will be received on when-issued securities are fixed at the time the buyer enters into the commitment. Due to fluctuations in the value of securities purchased or sold on a when-issued or delayed-delivery basis, the yields obtained on such securities may be higher or lower than the yields available in the market on the dates when the investments are actually delivered to the buyers. The greater the Funds' outstanding commitments for these securities, the greater the exposure to potential fluctuations in the net asset value of the Funds. Purchasing when-issued or delayed-delivery securities may involve the additional risk that the yield or market price available in the market when the delivery occurs may be higher or the market price lower than that obtained at the time of commitment.
If the Funds agree to purchase when-issued or delayed-delivery securities, to the extent required by the SEC, its custodian will set aside permissible liquid assets equal to the amount of the commitment in a segregated account. Normally, the custodian will set aside portfolio securities to satisfy a purchase commitment, and in such a case the Fund may be required subsequently to place additional assets in the segregated account in order to ensure that the value of the segregated account remains equal to the amount of the Funds' commitment. It may be expected that the Funds' net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. In addition, because the Funds will set aside cash or liquid portfolio securities to satisfy its purchase commitments in the manner described above, the Funds' liquidity and the ability of its adviser or subadviser to manage it might be affected in the event its commitments to purchase "when-issued" securities ever exceed 25% of the value of its total assets. Under normal market conditions, however, the Funds' commitment to purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of the value of its total assets. When the Funds engage in when-issued or delayed-delivery transactions, it relies on the other party to consummate the trade. Failure of the seller to do so may result in the Funds incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
LENDING PORTFOLIO SECURITIES
The Funds may lend their respective portfolio securities to brokers, dealers and other financial institutions, provided it receives collateral, with respect to the loan of U.S. securities, equal to at least 102% of the value of the portfolio securities loaned, and with respect to each such loan of non-U.S. securities, collateral of at least 105% of the value of the portfolio securities loaned, and at all times thereafter shall require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities so loaned. By lending its portfolio securities, the Funds can increase their income through the investment of the cash collateral. For the purposes of this policy, the Funds considers collateral consisting of cash, U.S. government securities or letters of credit issued by qualified banks whose securities meet the standards for investment by the Funds to be the equivalent of cash. From time to time, the Funds may return to the borrower or a third party which is unaffiliated with them, and which is acting as a "placing broker," a part of the interest earned from the investment of collateral received for securities loaned.
The SEC currently requires that the following conditions must be met whenever portfolio securities are loaned: (1) the Fund must receive at least 100% collateral of the type discussed in the preceding paragraph from the borrower; (2) the borrower must increase such collateral whenever the market value of the securities loaned rises above the level of such collateral; (3) the Funds must be able to terminate the loan at any time; (4) the Funds must receive reasonable interest on the loan, as well as any dividends, interest or other distributions payable on the loaned securities, and any increase in market value; (5) the Funds may pay only reasonable custodian fees in connection with the loan; and (6) while any voting rights on the loaned securities may pass to the borrower, the Funds' Board of Trustees must be able to terminate the loan and regain the right to vote the securities if a material event adversely affecting the investment occurs. These conditions may be subject to future modification. Loan agreements involve certain risks in the event of default or insolvency of the other party including possible delays or restrictions upon the Funds' ability to recover the loaned securities or dispose of the collateral for the loan.
INVESTMENT OF SECURITIES LENDING COLLATERAL
The cash collateral received from a borrower as a result of the Funds' securities lending activities will be used to purchase both fixed-income securities and other securities with debt-like characteristics that are rated A1 or P1 on a fixed rate or floating rate basis, including: bank obligations; commercial paper; investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company; loan participations; master notes; medium term notes; repurchase agreements; and U.S. government securities. Except for the investment agreements, funding agreements or guaranteed investment contracts guaranteed by an insurance company, master notes, and medium term notes (which are described below), these types of investments are described elsewhere in the SAI. Collateral may also be invested in a money market investment company or short-term collective investment trust.
Investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company are agreements where an insurance company either provides for the investment of the Fund's assets or may provide for a minimum guaranteed rate of return to the investor.
Master notes are promissory notes issued usually with large, creditworthy broker-dealers on either a fixed rate or floating rate basis. Master notes may or may not be collateralized by underlying securities. If the master note is issued by an unrated subsidiary of a broker-dealer, then the unconditional guarantee is provided by the issuer's parent.
Medium-term notes are unsecured, continuously offered corporate debt obligations. Although medium-term notes may be offered with a maturity from one to ten years, in the context of securities lending collateral, the maturity of the medium-term note will not generally exceed two years.
INDEXED SECURITIES
The Funds may invest in securities whose potential return is based on the change in particular measurements of value or rates (an "index"). As an illustration, the Funds may invest in a debt security that pays interest and returns principal based on the change in the value of a securities index or a basket of securities. If the Funds invest in such securities, it may be subject to reduced or eliminated interest payments or loss of principal in the event of an adverse movement in the relevant index.
SMALL COMPANY AND EMERGING GROWTH STOCKS
Investing in securities of small-sized, including micro-capitalization companies and emerging growth companies, may involve greater risks than investing in the stocks of larger, more established companies, including possible risk of loss. Also, because these securities may have limited marketability, their prices may be more volatile than securities of larger, more established companies or the market averages in general. Because small-sized and emerging growth companies normally have fewer shares outstanding than larger companies, it may be more difficult for a Fund to buy or sell significant numbers of such shares without an unfavorable impact on prevailing prices. Small-sized and emerging growth companies may have limited product lines, markets or financial resources and may lack management depth. In addition, small-sized and emerging growth companies are typically subject to wider variations in earnings and business prospects than are larger, more established companies. There is typically less
publicly available information concerning small-sized and emerging growth companies than for larger, more established ones.
SPECIAL SITUATION COMPANIES
"Special situation companies" include those involved in an actual or prospective acquisition or consolidation; reorganization; recapitalization; merger, liquidation or distribution of cash, securities or other assets; a tender or exchange offer; a breakup or workout of a holding company; or litigation which, if resolved favorably, would improve the value of the company's stock. If the actual or prospective situation does not materialize as anticipated, the market price of the securities of a "special situation company" may decline significantly. Therefore, an investment in the Funds, to the extent that they invest a significant portion of their assets in these securities, may involve a greater degree of risk than an investment in other mutual funds that seek long-term growth of capital by investing in better-known, larger companies. The Funds' adviser or subadvisers believe, however, that if the adviser or subadviser analyzes "special situation companies" carefully and invests in the securities of these companies at the appropriate time, the Funds may achieve capital growth. There can be no assurance however, that a special situation that exists at the time the Funds make their investment will be consummated under the terms and within the time period contemplated, if it is consummated at all.
FOREIGN SECURITIES
The Funds may invest in foreign securities (including through the use of depositary receipts), which involves certain special considerations which typically are not associated with investing in securities in the United States. Since investments in foreign companies will frequently involve currencies of foreign countries, and since the Funds may hold securities and funds in foreign currencies, the Funds may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, if any, and may incur costs in connection with conversions between various currencies. Most foreign stock markets, while growing in volume of trading activity, have less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of comparable domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than in the United States and, at times, volatility of price can be greater than in the United States. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on United States exchanges, although the Funds endeavor to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers and listed companies in foreign countries than in the United States. In addition, with respect to certain foreign countries, there is the possibility of exchange control restrictions, expropriation or confiscatory taxation, and political, economic or social instability, which could affect investments in those countries. Foreign securities, such as those purchased by the Funds, may be subject to foreign government taxes, higher custodian fees, higher brokerage costs and dividend collection fees which could reduce the yield on such securities.
Foreign economies may differ favorably or unfavorably from the U.S. economy in various respects, including growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency, and balance of payments positions. Many foreign securities are less liquid and their prices more volatile than comparable U.S. securities. From time to time, foreign securities may be difficult to liquidate rapidly without adverse price effects.
Investment in Companies in Developing Countries. Investments may be made from time to time in companies in developing countries as well as in developed countries. Although there is no universally accepted definition, a developing country is generally considered to be a country which is in the initial stages of industrialization. Shareholders should be aware that investing in the equity and fixed income markets of developing countries involves exposure to unstable governments, economies based on only a few industries, and securities markets which trade a small number of securities. Securities markets of developing countries tend to be more volatile than the markets of developed countries; however, such markets have in the past provided the opportunity for higher rates of return to investors.
The value and liquidity of investments in developing countries may be affected favorably or unfavorably by political, economic, fiscal, regulatory or other developments in the particular countries or neighboring regions. The extent of economic development, political stability and market depth of different countries varies widely.
Certain countries in the Asia region, including Cambodia, China, Laos, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam are either comparatively underdeveloped or are in the process of becoming developed. Such investments typically involve greater potential for gain or loss than investments in securities of issuers in developed countries.
The securities markets in developing countries are substantially smaller, less liquid and more volatile than the major securities markets in the United States. A high proportion of the shares of many issuers may be held by a limited number of persons and financial institutions, which may limit the number of shares available for investment by an Underlying Fund. Similarly, volume and liquidity in the bond markets in developing countries are less than in the United States and, at times, price volatility can be greater than in the United States. A limited number of issuers in developing countries' securities markets may represent a disproportionately large percentage of market capitalization and trading volume. The limited liquidity of securities markets in developing countries may also affect an Underlying Fund's ability to acquire or dispose of securities at the price and time it wishes to do so. Accordingly, during periods of rising securities prices in the more illiquid securities markets, an Underlying Fund's ability to participate fully in such price increases may be limited by its investment policy of investing not more than 15% of its total net assets in illiquid securities. Conversely, an Underlying Fund's inability to dispose fully and promptly of positions in declining markets will cause the Underlying Fund's net asset value to decline as the value of the unsold positions is marked to lower prices. In addition, securities markets in developing countries are susceptible to being influenced by large investors trading significant blocks of securities.
Political and economic structures in many such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of the United States. Certain of such countries have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks described above, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the value of an Underlying Fund's investments in those countries and the availability to the Underlying Fund of additional investments in those countries.
Economies of developing countries may differ favorably or unfavorably from the United States' economy in such respects as rate of growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. As export-driven economies, the economies of countries in the Asia Region are affected by developments in the economies of their principal trading partners. Hong Kong, Japan and Taiwan have limited natural resources, resulting in dependence on foreign sources for certain raw materials and economic vulnerability to global fluctuations of price and supply.
Certain developing countries do not have comprehensive systems of laws, although substantial changes have occurred in many such countries in this regard in recent years. Laws regarding fiduciary duties of officers and directors and the protection of shareholders may not be well developed. Even where adequate law exists in such developing countries, it may be impossible to obtain swift and equitable enforcement of such law, or to obtain enforcement of the judgment by a court of another jurisdiction.
Trading in futures contracts on foreign commodity exchanges may be subject to the same or similar risks as trading in foreign securities.
Depositary Receipts. The Funds may invest in foreign securities by purchasing depositary receipts, including American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or other securities convertible into securities of issuers based in foreign countries. These securities may not necessarily be denominated in the same currency as the securities which they represent. Generally, ADRs, in registered form, are denominated in U.S. dollars and are designed for use in the U.S. securities markets, GDRs, in bearer form, are issued and designed for use outside the United States and EDRs (also referred to as Continental Depositary Receipts ("CDRs")), in bearer form, may be denominated in other currencies and are designed for use in European securities markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities. EDRs are European receipts evidencing a similar arrangement. GDRs are receipts typically issued by non-United States banks and trust companies that evidence ownership of either foreign or domestic securities. For purposes of the Funds' investment policies, ADRs, GDRs and EDRs are
deemed to have the same classification as the underlying securities they represent. Thus, an ADR, GDR or EDR representing ownership of common stock will be treated as common stock.
The Funds may invest in depositary receipts through "sponsored" or "unsponsored" facilities. While depositary receipts issued under these two types of facilities are in some respects similar, there are distinctions between them relating to the rights and obligations of depositary receipt holders and the practices of market participants.
A depositary may establish an unsponsored facility without participation by (or even necessarily the acquiescence of) the issuer of the deposited securities, although typically the depositary requests a letter of non-objection from such issuer prior to the establishment of the facility. Holders of unsponsored ADRs generally bear all the costs of such facilities. The depositary usually charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. dollars, the disposition of non-cash distributions, and the performance of other services. The depositary of an unsponsored facility frequently is under no obligation to pass through voting rights to ADR holders in respect of the deposited securities. In addition, an unsponsored facility is generally not obligated to distribute communications received from the issuer of the deposited securities or to disclose material information about such issuer in the U.S. and thus there may not be a correlation between such information and the market value of the depositary receipts. Unsponsored ADRs tend to be less liquid than sponsored ADRs.
Sponsored ADR facilities are created in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities enters into a deposit agreement with the depositary. The deposit agreement sets out the rights and responsibilities of the issuer, the depositary, and the ADR holders. With sponsored facilities, the issuer of the deposited securities generally will bear some of the costs relating to the facility (such as dividend payment fees of the depositary), although ADR holders continue to bear certain other costs (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositaries agree to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited securities.
CONVERTIBLE SECURITIES
Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into or exchanged for a specified amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. Convertible securities have general characteristics similar to both debt obligations and equity securities. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, the credit standing of the issuer and other factors. The market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. The conversion value of a convertible security is determined by the market price of the underlying common stock. The market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock and therefore will react to variations in the general market for equity securities. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed-income security. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer.
A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed-income characteristics, and (iii) provide the potential for
capital appreciation if the market price of the underlying common stock increases. Most convertible securities currently are issued by U.S. companies, although a substantial Eurodollar convertible securities market has developed, and the markets for convertible securities denominated in local currencies are increasing.
A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. If a convertible security held by a Fund is called for redemption, a Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock, or sell it to a third party.
Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, generally enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock of the same issuer. Because of the subordination feature, however, some convertible securities typically are rated below investment grade or are not rated, depending on the general creditworthiness of the issuer.
WARRANTS
Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance), on a specified date, during a specified period, or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants acquired by a Fund in units or attached to securities are not subject to these restrictions. Warrants do not carry with them the right to dividends or voting rights with respect to the securities that they entitle their holder to purchase, and they do not represent any rights in the assets of the issuer. As a result, warrants may be considered more speculative than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date.
PREFERRED STOCK
Preferred stocks, like some debt obligations, are generally fixed-income securities. Shareholders of preferred stocks normally have the right to receive dividends at a fixed rate when and as declared by the issuer's board of directors, but do not participate in other amounts available for distribution by the issuing corporation. Dividends on the preferred stock may be cumulative, and all cumulative dividends usually must be paid prior to shareholders of common stock receiving any dividends. Because preferred stock dividends must be paid before common stock dividends, preferred stocks generally entail less risk than common stocks. Upon liquidation, preferred stocks are entitled to a specified liquidation preference, which is generally the same as the par or stated value, and are senior in right of payment to common stock. Preferred stocks are, however, equity securities in the sense that they do not represent a liability of the issuer and, therefore, do not offer as great a degree of protection of capital or assurance of continued income as investments in corporate debt securities. Preferred stocks generally are subordinated in right of payment to all debt obligations and creditors of the issuer, and convertible preferred stocks may be subordinated to other preferred stock of the same issuer.
INTERESTS IN PUBLICLY TRADED LIMITED PARTNERSHIPS
The Funds may also invest in interests in publicly traded limited partnerships (limited partnership interests or units) which represent equity interests in the assets and earnings of the partnership's trade or business. Unlike common stock in a corporation, limited partnership interests have limited or no voting rights. However, many of the risks of investing in common stocks are still applicable to investments in limited partnership interests. In addition, limited partnership interests are subject to risks not present in common stock. For example, interest income generated from limited partnerships deemed not to be "publicly traded" will not be considered "qualifying income" under the Internal Revenue Code of 1986, as amended (the "Code"), and may trigger adverse tax consequences. Also, since publicly traded limited partnerships are a less common form of organizational structure than corporations, the limited partnership units may be less liquid than publicly traded common stock. Also, because of the difference in organizational structure, the fair value of limited partnership units in a Fund's portfolio may be based either upon the current market price of such units, or if there is no current market price, upon the pro rata value of the underlying assets of the partnership. Limited partnership units also have the risk that the limited
partnership might, under certain circumstances, be treated as a general partnership giving rise to broader liability exposure to the limited partners for activities of the partnership. Further, the general partners of a limited partnership may be able to significantly change the business or asset structure of a limited partnership without the limited partners having any ability to disapprove any such changes. In certain limited partnerships, limited partners may also be required to return distributions previously made in the event that excess distributions have been made by the partnership, or in the event that the general partners, or their affiliates, are entitled to indemnification.
SHORT SELLING OF SECURITIES
In a short sale of securities, a Fund sells stock which it does not own, making delivery with securities "borrowed" from a broker. The Fund is then obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. This price may or may not be less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay the lender any dividends or interest which accrue during the period of the loan. In order to borrow the security, the Fund may also have to pay a premium and/or interest which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. In addition, the broker may require the deposit of collateral (generally, up to 50% of the value of the securities sold short).
A Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those two dates. The amount of any gain will be decreased and the amount of any loss will be increased by any premium or interest the Fund may be required to pay in connection with the short sale. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security. However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction. Whether a Fund will be successful in utilizing a short sale will depend, in part, on the ability of the Fund's adviser to predict correctly whether the price of a security it borrows to sell short will decrease.
In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. A Fund must segregate or earmark an amount of cash or other liquid assets equal to the difference between (a) the market value of securities sold short at the time that they were sold short and (b) the value of the collateral deposited with the broker to meet margin requirements in connection with the short sale (not including the proceeds from the short sale). While the short position is open, the Fund must maintain on a daily basis segregated or earmarked liquid assets at such a level that the amount segregated or earmarked plus the amount of collateral deposited with the broker as margin equals the current market value of the securities sold short.
Each Fund also may engage in short sales, if at the time of the short sale the Fund owns or has the right to obtain without additional cost an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." The Funds do not intend to engage in short sales against the box for investment purposes. A Fund may, however, make a short sale as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund (or a security convertible or exchangeable for such security), or when a Fund wants to sell the security at an attractive current price. In such a case, any future losses in the Fund's long position should be offset by a gain in the short position and, conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns. There will be certain additional transaction costs associated with short sales against the box. For tax purposes, a Fund that enters into a short sale "against the box" may be treated as having made a constructive sale of an "appreciated financial position," causing the Fund to realize gain, but not loss.
RESTRICTED, NON-PUBLICLY TRADED AND ILLIQUID SECURITIES
Each Fund may not invest more than 15% of its net assets, in the aggregate, in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits maturing in more than seven days and securities that are illiquid because of the absence of a readily available market or legal or contractual
restrictions on resale or other factors limiting the marketability of the security. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Unless subsequently registered for sale, these securities can only be sold in privately negotiated transactions or pursuant to an exemption from registration. The Funds typically do not hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities, and a Fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A Fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
The SEC has adopted Rule 144A which allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers.
Any such restricted securities will be considered to be illiquid for purposes of the Funds' limitations on investments in illiquid securities unless, pursuant to procedures adopted by the Board of Trustees of the Trust, the Funds' adviser has determined such securities to be liquid because such securities are eligible for resale pursuant to Rule 144A and are readily saleable. To the extent that qualified institutional buyers may become uninterested in purchasing Rule 144A securities, the Funds' level of illiquidity may increase.
The Funds may sell over-the-counter ("OTC") options and, in connection therewith, segregate assets or cover its obligations with respect to OTC options written by the Funds. The assets used as cover for OTC options written by the Funds will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Funds may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC option written subject to this procedure would be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option.
The Funds' adviser will monitor the liquidity of restricted securities in
the portion of the Fund it manages. In reaching liquidity decisions, the
following factors are considered: (1) the unregistered nature of the security;
(2) the frequency of trades and quotes for the security; (3) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (4) dealer undertakings to make a market in the security
and (5) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
Private Placement Commercial Paper. Commercial paper eligible for resale under Section 4(2) of the Securities Act is offered only to accredited investors. Rule 506 of Regulation D in the Securities Act lists investment companies as accredited investors.
Section 4(2) paper not eligible for resale under Rule 144A under the Securities Act shall be deemed liquid if (1) the Section 4(2) paper is not traded flat or in default as to principal and interest; (2) the Section 4(2) paper is rated in one of the two highest rating categories by at least two nationally recognized statistical ratings organizations ("NRSROs"), or if only one NRSRO rates the security, it is rated in one of the two highest categories by that NRSRO; and (3) the adviser believes that, based on the trading markets for such security, such security can be
disposed of within seven days in the ordinary course of business at approximately the amount at which the Funds have valued the security.
BORROWING
The Funds may borrow money from banks, limited by the Funds' fundamental investment restriction (generally, 331/3% of its total assets (including the amount borrowed)), including borrowings for temporary or emergency purposes. The Funds may engage in reverse repurchase agreements which may be considered a form of borrowing, unless the Fund covers its exposure by segregating or earmarking liquid assets.
DERIVATIVE INSTRUMENTS
The Funds' adviser may use a variety of derivative instruments, including options, futures contracts (sometimes referred to as "futures"), options on futures contracts, stock index options, forward currency contracts, swaps and structured contracts, to hedge the Funds' portfolio or for risk management or for any other permissible purposes consistent with the Funds' investment objective. Derivative instruments are securities or agreements with their values based on the value of an underlying asset (e.g., a security, currency or index) or the level of a reference index.
Derivatives generally have investment characteristics that are based upon either forward contracts (under which one party is obligated to buy and the other party is obligated to sell an underlying asset at a specific price on a specified date) or option contracts (under which the holder of the option has the right but not the obligation to buy or sell an underlying asset at a specified price on or before a specified date). Consequently, the change in value of a forward-based derivative generally is roughly proportional to the change in value of the underlying asset. In contrast, the buyer of an option-based derivative generally will benefit from favorable movements in the price of the underlying asset but is not exposed to the corresponding losses that result from adverse movements in the value of the underlying asset. The seller (writer) of an option-based derivative generally will receive fees or premiums but generally is exposed to losses resulting from changes in the value of the underlying asset. Derivative transactions may include elements of leverage and, accordingly, the fluctuation of the value of the derivative transaction in relation to the underlying asset may be magnified.
The use of these instruments is subject to applicable regulations of the SEC, the several options and futures exchanges upon which they may be traded, and the Commodity Futures Trading Commission ("CFTC").
Special Risks of Derivative Instruments. The use of derivative instruments involves special considerations and risks as described below. Risks pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon a Fund's adviser's ability to predict movements of the overall securities and currency markets, which requires skills different from those necessary for predicting changes in the prices of individual securities. There can be no assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation, between price movements of an instrument and price movements of investments being hedged. For example, if the value of an instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be fully successful. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. The effectiveness of hedges using instruments on indices will depend on the degree of correlation between price movements in the index and price movements in the investments being hedged, as well as, how similar the index is to the portion of the Funds' assets being hedged in terms of securities composition.
(3) Hedging strategies, if successful, can reduce the risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments. For example, if the Funds entered into short hedges because the Funds' adviser or subadviser projected a decline in the price of a security in the Funds' portfolio, and the price of that security increased instead, the gain
from that increase might be wholly or partially offset by a decline in the price of the instrument. Moreover, if the price of the instrument declined by more than the increase in the price of the security, the Funds could suffer a loss.
(4) As described below, the Funds might be required to maintain assets as "cover," maintain segregated accounts, or make margin payments when they take positions in these instruments involving obligations to third parties (i.e., instruments other than purchased options). If the Funds were unable to close out their positions in such instruments, they might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Funds' ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Funds sell a portfolio security at a disadvantageous time. The Funds' ability to close out a position in an instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction ("counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any hedging position can be closed out at a time and price that is favorable to the Funds.
Options. The Funds may purchase or write put and call options on securities and indices, and may purchase options on foreign currencies and interest rates, and enter into closing transactions with respect to such options to terminate an existing position. The purchase of call options serves as a long hedge, and the purchase of put options serves as a short hedge. Writing put or call options can enable the Funds to enhance income by reason of the premiums paid by the purchaser of such options. Writing call options serves as a limited short hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security appreciates to a price higher than the exercise price of the call option, it can be expected that the option will be exercised, and the Funds will be obligated to sell the security at less than its market value or will be obligated to purchase the security at a price greater than that at which the security must be sold under the option. All or a portion of any assets used as cover for OTC options written by the Funds would be considered illiquid to the extent described under "Restricted, Non-Publicly Traded and Illiquid Securities" above. Writing put options serves as a limited long hedge because increases in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security depreciates to a price lower than the exercise price of the put option, it can be expected that the put option will be exercised, and the Funds will be obligated to purchase the security at more than its market value.
The value of an option position will reflect, among other things, the historical price volatility of the underlying investment, the current market value of the underlying investment, the time remaining until expiration of the option, the relationship of the exercise price to the market price of the underlying investment, and general market conditions. Options that expire unexercised have no value. Options used by the Funds may include European-style options, which can only be exercised at expiration. This is in contrast to American-style options which can be exercised at any time prior to the expiration date of the option.
A Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, a Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, a Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Funds to realize the profit or limit the loss on an option position prior to its exercise or expiration.
The Funds may purchase or write both OTC options and options traded on foreign and U.S. exchanges. Exchange-traded options are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded option transaction. OTC options are contracts between the Funds and a counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when the Funds purchase or write an OTC option, they rely on the counterparty to make or take delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premium paid by the Funds as well as the loss of any expected benefit of the transaction.
The Funds' ability to establish and close out positions in exchange-listed options depends on the existence of a liquid market. The Funds intend to purchase or write only those exchange-traded options for which there appears to be a liquid secondary market. However, there can be no assurance that such a market will exist at any
particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. Although the Funds will enter into OTC options only with counterparties that are expected to be capable of entering into closing transactions with the Funds, there is no assurance that the Funds will in fact be able to close out an OTC option at a favorable price prior to expiration. In the event of insolvency of the counterparty, the Funds might be unable to close out an OTC option position at any time prior to its expiration.
If the Funds are unable to effect a closing transaction for an option they had purchased, they would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by the Funds could cause material losses because the Funds would be unable to sell the investment used as a cover for the written option until the option expires or is exercised.
The Funds may engage in options transactions on indices in much the same manner as the options on securities discussed above, except that index options may serve as a hedge against overall fluctuations in the securities markets in general.
The writing and purchasing of options is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Imperfect correlation between the options and securities markets may detract from the effectiveness of attempted hedging.
Transactions using OTC options (other than purchased options) expose the Funds to counterparty risk. To the extent required by SEC guidelines, the Funds will not enter into any such transactions unless they own either (1) an offsetting ("covered") position in securities, other options, or futures or (2) cash and liquid obligations with a value sufficient at all times to cover their potential obligations to the extent not covered as provided in (1) above. The Funds will also set aside cash and/or appropriate liquid assets in a segregated custodial account if required to do so by the SEC and CFTC regulations. Assets used as cover or held in a segregated account cannot be sold while the position in the corresponding option or futures contract is open, unless they are replaced with similar assets. As a result, the commitment of a large portion of the Funds' assets to segregated accounts as a cover could impede portfolio management's or the Funds' ability to meet redemption requests or other current obligations.
An interest rate option is an agreement with a counterparty giving the buyer the right but not the obligation to buy or sell an interest rate hedging vehicle (such as a treasury future or interest rate swap) at a future date at a predetermined price. The option buyer would pay a premium at the inception of the agreement. An interest rate option can be used to actively manage the Funds' interest rate risk with respect to either an individual bond or an overlay of the entire portfolio.
Spread Transactions. The Funds may purchase covered spread options from securities dealers. Such covered spread options are not presently exchange-listed or exchange-traded. The purchase of a spread option gives a Fund the right to put, or sell, a security that it owns at a fixed dollar spread or fixed yield spread in relationship to another security that the Fund does not own, but which is used as a benchmark. The risk to the Funds in purchasing covered spread options is the cost of the premium paid for the spread option and any transaction costs. In addition, there is no assurance that closing transactions will be available. The purchase of spread options will be used to protect the Funds against adverse changes in prevailing credit quality spreads, (i.e., the yield spread between high quality and lower quality securities). Such protection is only provided during the life of the spread option.
Futures Contracts. The Funds may enter into futures contracts, including interest rate, index, and currency futures and purchase and write (sell) related options. The purchase of futures or call options thereon can serve as a long hedge, and the sale of futures or the purchase of put options thereon can serve as a short hedge. Writing covered call options on futures contracts can serve as a limited short hedge, and writing covered put options on futures contracts can serve as a limited long hedge, using a strategy similar to that used for writing covered options in securities. The Funds' hedging may include purchases of futures as an offset against the effect of expected increases in securities prices or currency exchange rates and sales of futures as an offset against the effect of expected declines in securities prices or currency exchange rates. The Funds may write put options on futures contracts while at the same time purchasing call options on the same futures contracts in order to create synthetically a long futures contract position. Such options would have the same strike prices and expiration dates. The Funds will
engage in this strategy only when the Funds' adviser believes it is more advantageous to the Funds than purchasing the futures contract.
To the extent required by regulatory authorities, the Funds will only enter into futures contracts that are traded on U.S. or foreign exchanges or boards of trade approved by the CFTC and are standardized as to maturity date and underlying financial instrument. These transactions may be entered into for "bona fide hedging" purposes as defined in CFTC regulations and other permissible purposes including increasing return and hedging against changes in the value of portfolio securities due to anticipated changes in interest rates, currency values and/or market conditions.
The Funds will not enter into futures contracts and related options for other than "bona fide hedging" purposes for which the aggregate initial margin and premiums required to establish positions exceed 5% of the Funds' net asset value after taking into account unrealized profits and unrealized losses on any such contracts they have entered into. There is no overall limit on the percentage of the Funds' assets that may be at risk with respect to futures activities. Although techniques other than sales and purchases of futures contracts could be used to reduce the Fund's exposure to market, currency, or interest rate fluctuations, the Funds may be able to hedge their exposure more effectively and perhaps at a lower cost through using futures contracts.
A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument (e.g., debt security) or currency for a specified price at a designated date, time, and place. An index futures contract is an agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified multiplier times the difference between the value of the index at the close of the last trading day of the contract and the price at which the index futures contract was originally written. Transaction costs are incurred when a futures contract is bought or sold and margin deposits must be maintained. A futures contract may be satisfied by delivery or purchase, as the case may be, of the instrument or the currency, or by payment of the change in the cash value of the index. More commonly, futures contracts are closed out prior to delivery by entering into an offsetting transaction in a matching futures contract. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of those securities is made. If the offsetting purchase price is less than the original sale price, a Fund realizes a gain; if it is more, a Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, a Fund realizes a gain; if it is less, a Fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that the Funds will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If a Fund is not able to enter into an offsetting transaction, a Fund will continue to be required to maintain the margin deposits on the futures contract.
No price is paid by a Fund upon entering into a futures contract. Instead, at the inception of a futures contract, a Fund is required to deposit in a segregated account with its custodian, in the name of the futures broker through whom the transaction was effected, "initial margin" consisting of cash, U.S. government securities or other liquid obligations, in an amount generally equal to 10% or less of the contract value. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Unlike margin in securities transactions, initial margin on futures contracts does not represent a borrowing, but rather is in the nature of a performance bond or good-faith deposit that is returned to the Funds at the termination of the transaction if all contractual obligations have been satisfied. Under certain circumstances, such as periods of high volatility, a Fund may be required by an exchange to increase the level of its initial margin payment, and initial margin requirements might be increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures broker daily as the value of the futures position varies, a process known as "marking to market." Variation margin does not involve borrowing, but rather represents a daily settlement of a Fund's obligations to or from a futures broker. When a Fund purchases an option on a future, the premium paid plus transaction costs is all that is at risk. In contrast, when a Fund purchases or sells a futures contract or writes a call or put option thereon, it is subject to daily variation margin calls that could be substantial in the event of adverse price movements. If a Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous. Purchasers and sellers of futures positions and options on futures can enter into offsetting closing transactions by selling or purchasing, respectively, an instrument identical to the instrument held or written. Positions in futures and options on futures may be closed only on an exchange or board of trade on which they were entered into (or through a linked
exchange). Although the Funds intend to enter into futures transactions only on exchanges or boards of trade where there appears to be an active market, there can be no assurance that such a market will exist for a particular contract at a particular time.
Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a future or option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.
If a Fund was unable to liquidate a futures contract or option on a futures contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses, because it would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, a Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the futures market might increase the risk that movements in the prices of futures contracts or options on futures contracts might not correlate perfectly with movements in the prices of the investments being hedged. For example, all participants in the futures and options on futures contracts markets are subject to daily variation margin calls and might be compelled to liquidate futures or options on futures contracts positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, because initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the future markets. This participation also might cause temporary price distortions. In addition, activities of large traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions.
Swap Agreements. A Fund may enter into interest rate, securities index, commodity, or security and currency exchange rate swap agreements for any lawful purpose consistent with such Fund's investment objective, such as for the purpose of attempting to obtain or preserve a particular desired return or spread at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return or spread. A Fund also may enter into swaps in order to protect against an increase in the price of, or the currency exchange rate applicable to, securities that the Fund anticipates purchasing at a later date. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from one or more days to several years. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Swap agreements may include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. "Total return swaps" are contracts in which one party agrees to make payments of the total return from the underlying asset during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another underlying asset.
The "notional amount" of the swap agreement is the agreed upon basis for calculating the obligations that the parties to a swap agreement have agreed to exchange. Under most swap agreements entered into by a Fund, the obligations of the parties would be exchanged on a "net basis." Consequently, a Fund's obligation (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). A Fund's obligation under a swap agreement will be accrued daily (offset against amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of cash or liquid assets.
Whether a Fund's use of swap agreements will be successful in furthering its investment objective will depend, in part, on a Fund's adviser's or subadviser's ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Swap agreements may be considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The swaps market is largely unregulated.
A Fund will enter swap agreements only with counterparties that a Fund's adviser or subadviser reasonably believes are capable of performing under the swap agreements. If there is a default by the other party to such a transaction, a Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction.
Structured Products. The Funds may use structured products to hedge their portfolios. Structured products generally are individually negotiated agreements and may be traded over-the-counter. They are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans) and the issuance by that entity of one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments.
With respect to structured products, because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there is currently no active trading market for these securities.
Hybrid Instruments. Hybrid instruments combine elements of derivative contracts with those of another security (typically a fixed-income security). All or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of an underlying asset or by reference to another benchmark (such as interest rates, currency exchange rates or indices). Hybrid instruments also include convertible securities with conversion terms related to an underlying asset or benchmark.
The risks of investing in hybrid instruments reflect a combination of the risks of investing in securities, options, futures and currencies, and depend upon the terms of the instrument. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional fixed-income or convertible securities. Hybrid instruments are also potentially more volatile and carry greater interest rate risks than traditional instruments. Moreover, depending on the structure of the particular hybrid, it may expose the Funds to leverage risks or carry liquidity risks.
Credit Linked Notes. A credit linked note ("CLN") is a type of hybrid
instrument in which a special purpose entity issues a structured note (the "Note
Issuer") that is intended to replicate a corporate bond or a portfolio of
corporate bonds. The purchaser of the CLN (the "Note Purchaser") invests a par
amount and receives a payment during the term of the CLN that equals a fixed or
floating rate of interest equivalent to a high rated funded asset (such as a
bank certificate of deposit) plus an additional premium that relates to taking
on the credit risk of an identified bond (the "Reference Bond"). Upon maturity
of the CLN, the Note Purchaser will receive a payment equal to: (i) the original
par amount paid to the Note Issuer, if there is neither a designated event of
default (an "Event of Default") with respect to the Reference Bond nor a
restructuring of the issuer of the Reference Bond (a "Restructuring Event"); or
(ii) the value of the Reference Bond if an Event of Default or a Restructuring
Event has occurred. Depending upon the terms of the CLN, it is also possible
that the Note Purchaser may be required to take physical delivery of the
Reference Bond if an Event of Default or a Restructuring Event occurs.
Foreign Currency-Related Derivative Strategies -- Special Considerations. The Funds may use options and futures and options on futures on foreign currencies and forward currency contracts to hedge against movements in
the values of the foreign currencies in which the Fund securities are denominated. The Funds may engage in currency exchange transactions to protect against uncertainty in the level of future exchange rates and may also engage in currency transactions to increase income and total return. Such currency hedges can protect against price movements in a security a Fund owns or intends to acquire that are attributable to changes in the value of the currency in which it is denominated. Such hedges do not, however, protect against price movements in the securities that are attributable to other causes.
The Funds might seek to hedge against changes in the value of a particular currency when no hedging instruments on that currency are available or such hedging instruments are more expensive than certain other hedging instruments. In such cases, the Funds may hedge against price movements in that currency by entering into transactions using hedging instruments on another foreign currency or a basket of currencies, the values of which the Fund adviser or subadviser believes will have a high degree of positive correlation to the value of the currency being hedged. The risk that movements in the price of the hedging instrument will not correlate perfectly with movements in the price of the currency being hedged is magnified when this strategy is used.
The value of derivative instruments on foreign currencies depends on the value of the underlying currency relative to the U.S. dollar. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such hedging instruments, the Funds could be disadvantaged by having to deal in the odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies or any regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Quotation information generally is representative of very large transactions in the interbank market and thus might not reflect odd-lot transactions where rates might be less favorable. The interbank market in foreign currencies is a global, round-the-clock market. To the extent the U.S. options or futures markets are closed while the markets for the underlying currencies remain open, significant price and rate movements might take place in the underlying markets that cannot be reflected in the markets for the derivative instruments until they reopen.
Settlement of derivative transactions involving foreign currencies might be required to take place within the country issuing the underlying currency. Thus, the Funds might be required to accept or make delivery of the underlying foreign currency in accordance with any U.S. or foreign regulations regarding the maintenance of foreign banking arrangements by U.S. residents and might be required to pay any fees, taxes and charges associated with such delivery assessed in the issuing country.
Permissible foreign currency options will include options traded primarily in the OTC market. Although options on foreign currencies are traded primarily in the OTC market, the Funds will normally purchase OTC options on foreign currency only when the Funds' adviser believes a liquid secondary market will exist for a particular option at any specific time.
FORWARD CURRENCY CONTRACTS
A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers.
At or before the maturity of a forward currency contract, a Fund may either sell a portfolio security and make delivery of the currency, or retain the security and fully or partially offset its contractual obligation to deliver the currency by purchasing a second contract. If a Fund retains the portfolio security and engages in an offsetting transaction, the Fund, at the time of execution of the offsetting transaction, will incur a gain or a loss to the extent that movement has occurred in forward currency contract prices.
The precise matching of forward currency contract amounts and the value of the securities involved generally will not be possible because the value of such securities, measured in the foreign currency, will change after the foreign currency contract has been established. Thus, the Fund might need to purchase or sell foreign
currencies in the spot (cash) market to the extent such foreign currencies are not covered by forward currency contracts. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short term hedging strategy is highly uncertain.
Currency Hedging. While the values of forward currency contracts, currency options, currency futures and options on futures may be expected to correlate with exchange rates, they will not reflect other factors that may affect the value of a Fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect a Fund against price decline if the issuer's creditworthiness deteriorates. Because the value of a Fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, a currency hedge may not be entirely successful in mitigating changes in the value of a Fund's investments denominated in that currency over time.
A decline in the dollar value of a foreign currency in which a Fund's securities are denominated will reduce the dollar value of the securities, even if their value in the foreign currency remains constant. The use of currency hedges does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In order to protect against such diminutions in the value of securities it holds, a Fund may purchase put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell the currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its securities that otherwise would have resulted. Conversely, if a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby potentially increasing the cost of the securities, a Fund may purchase call options on the particular currency. The purchase of these options could offset, at least partially, the effects of the adverse movements in exchange rates. Although currency hedges limit the risk of loss due to a decline in the value of a hedged currency, at the same time, they also limit any potential gain that might result should the value of the currency increase.
A Fund may enter into foreign currency exchange transactions to hedge its currency exposure in specific transactions or portfolio positions. Transaction hedging is the purchase or sale of forward currency with respect to specific receivables or payables of a Fund generally accruing in connection with the purchase or sale of its portfolio securities. Position hedging is the sale of forward currency with respect to portfolio security positions. A Fund may not position hedge to an extent greater than the aggregate market value (at the time of making such sale) of the hedged securities.
SECURITIES OF INVESTMENT COMPANIES
To the extent permitted by the 1940 Act, each Fund may generally invest up to 10% of its total assets, calculated at the time of investment, in the securities of other investment companies. No more than 5% of a Fund's total assets may be invested in the securities of any one investment company nor may it acquire more than 3% of the voting securities of any other investment company. A Fund indirectly will bear its proportionate share of any management fees paid by an investment company in which it invests in addition to the advisory fee paid by the Fund. Some of the countries in which the Funds may invest may not permit direct investment by outside investors. Investments in such countries may only be permitted through foreign government-approved or government-authorized investment vehicles, which may include other investment companies.
REAL ESTATE INVESTMENT TRUSTS
Although the Funds will not invest in real estate directly, the Funds may invest in securities of real estate investment trusts ("REITs") and other real estate industry companies or companies with substantial real estate investments and, as a result, the Funds may be subject to certain risks associated with direct ownership of real estate and with the real estate industry in general. These risks include, among others: possible declines in the value of real estate; possible lack of availability of mortgage funds; extended vacancies of properties; risks related to general and local economic conditions; overbuilding; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates.
REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs. REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Code.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Loan Participations typically will result in a Fund having a contractual relationship only with the lender, not with the borrower. A Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Loan Participations, a Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Fund will assume the credit risk of both the borrower and the lender that is selling the Participation. In the event of the insolvency of the lender selling a Participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. A Fund will acquire Loan Participations only if the lender interpositioned between the Fund and the borrower is determined by the applicable adviser to be creditworthy. When a Fund purchases Assignments from lenders, the Fund will acquire direct rights against the borrower on the loan, except that under certain circumstances such rights may be more limited than those held by the assigning lender.
A Fund may have difficulty disposing of Assignments and Loan Participations. Because the market for such instruments is not highly liquid, the Funds anticipate that such instruments could be sold only to a limited number of institutional investors. The lack of a highly liquid secondary market may have an adverse impact on the value of such instruments and will have an adverse impact on a Fund's ability to dispose of particular Assignments or Loan Participations in response to a specific economic event, such as deterioration in the creditworthiness of the borrower.
In valuing a Loan Participation or Assignment held by a Fund for which a secondary trading market exists, the Fund will rely upon prices or quotations provided by banks, dealers or pricing services. To the extent a secondary trading market does not exist, a Fund's Loan Participations and Assignments will be valued in accordance with procedures adopted by the Board of Trustees, taking into consideration, among other factors: (i) the creditworthiness of the borrower under the loan and the lender; (ii) the current interest rate; period until next rate reset and maturity of the loan; (iii) recent prices in the market for similar loans; and (iv) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.
FLOATING AND VARIABLE RATE INSTRUMENTS
Floating or variable rate obligations bear interest at rates that are not fixed, but vary with changes in specified market rates or indices, such as the prime rate, or at specified intervals. The interest rate on floating-rate securities varies with changes in the underlying index (such as the Treasury bill rate), while the interest rate on variable or adjustable rate securities changes at pre-set times based upon an underlying index. Certain of the floating or variable rate obligations that may be purchased by the Funds may carry a demand feature that would permit the holder to tender them back to the issuer of the instrument or to a third party at par value prior to maturity.
Some of the demand instruments purchased by the Funds may not be traded in a secondary market and derive their liquidity solely from the ability of the holder to demand repayment from the issuer or third party providing credit support. If a demand instrument is not traded in a secondary market, the Funds will nonetheless treat the instrument as "readily marketable" for the purposes of its investment restriction limiting investments in illiquid securities unless the demand feature has a notice period of more than seven days in which case the instrument will be characterized as "not readily marketable" and therefore illiquid.
Such obligations include variable rate master demand notes, which are unsecured instruments issued pursuant to an agreement between the issuer and the holder that permit the indebtedness thereunder to vary and to provide for periodic adjustments in the interest rate. The Funds will limit their purchases of floating and variable rate obligations to those of the same quality as it is otherwise allowed to purchase. The Funds' adviser will monitor on an ongoing basis the ability of an issuer of a demand instrument to pay principal and interest on demand.
The Funds' right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Funds elect to demand payment and the date payment is due that may affect the ability of the issuer of the instrument or third party providing credit support to make payment when due, except when such demand instruments permit same day settlement. To facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than the Funds' custodian subject to a subcustodian agreement approved by the Funds between that bank and the Funds' custodian.
REVERSE REPURCHASE AGREEMENTS
The Funds may engage in reverse repurchase agreements to facilitate portfolio liquidity, a practice common in the mutual fund industry, or for arbitrage transactions discussed below. In a reverse repurchase agreement, the Funds would sell a security and enter into an agreement to repurchase the security at a specified future date and price. The Funds generally retain the right to interest and principal payments on the security. Since the Funds receive cash upon entering into a reverse repurchase agreement, it may be considered a borrowing (see "Borrowing"). When required by guidelines of the SEC, the Fund will segregate or earmark permissible liquid assets to secure its obligations to repurchase the security. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain segregated or earmarked liquid assets with an approved custodian having a value not less than the repurchase price (including accrued interest). The segregated or earmarked liquid assets will be marked-to-market daily and additional assets will be segregated or earmarked on any day in which the assets fall below the repurchase price (plus accrued interest). A Fund's liquidity and ability to manage its assets might be affected when it sets aside cash or portfolio securities to cover such commitments. Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale may decline below the price of the securities the Funds have sold but are obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Funds' obligation to repurchase the securities, and the Funds' use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such determination. Reverse repurchase agreements are considered to be borrowings under the 1940 Act.
Reverse repurchase agreements may be used as arbitrage transactions in which the Funds will maintain offsetting positions in repurchase agreements that mature on or before the settlement date on the related reverse repurchase agreements. Since the Funds will receive interest on the repurchase agreements in which they invest the transaction proceeds, such transactions may involve leverage. However, since such repurchase agreements will be high quality and will mature on or before the settlement date of the reverse repurchase agreement, the Funds' adviser believes that such arbitrage transactions do not present the risks to the Funds that are associated with other types of leverage.
TEMPORARY INVESTMENTS
Generally the Funds will be fully invested in accordance with their investment objectives and strategies. However, pending investment of cash balances, a Fund may invest without limit in cash or money market cash equivalents, including: (1) short-term U.S. government securities; (2) certificates of deposit, bankers' acceptances, and interest-bearing savings deposits of commercial banks; (3) prime quality commercial paper; (4) repurchase agreements covering any of the securities in which the Funds may invest directly; and (5) subject to regulatory limits, shares of other investment companies that invest in securities in which the Fund may invest. Should this occur, the Fund will not be pursuing its investment objective and may miss potential market upswings.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Funds is calculated by dividing the lesser of purchases or sales of portfolio securities for the year by the monthly average value of the portfolio securities, excluding securities whose maturities at the time of purchase were one year or less. High portfolio turnover rates will generally result in higher brokerage expenses, and may increase the volatility of the Funds. For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, the portfolio turnover rates for each Fund was as follows:
FUND PORTFOLIO TURNOVER RATE ---- ----------------------- Gartmore Small Cap Value Fund 37.3% Gartmore Small Cap Growth Opportunities Fund 194.16% |
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions for the Funds which cannot be changed without the vote of the majority of the outstanding shares of the Fund for which a change is proposed. The vote of the majority of the outstanding shares means the vote of (1) 67% or more of the voting securities present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy or (2) a majority of the outstanding voting securities, whichever is less.
Each Fund:
o May not purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, if, immediately after such purchase, more than 5% of the Fund's total assets would be invested in such issuer or the Fund would hold more than 10% of the outstanding voting securities of the issuer, except that 25% or less of the Fund's total assets may be invested without regard to such limitations. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
o May not lend any security or make any other loan except that the Fund may, in accordance with its investment objective and policies, (i) lend portfolio securities; (ii) purchase and hold debt securities or other debt instruments, including but not limited to loan participations and subparticipations, assignments, and structured securities; (iii) make loans secured by mortgages on real property; (iv) enter into repurchase agreements; and (v) make time deposits with financial institutions and invest in instruments issued by financial institutions, and enter into any other lending arrangement as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not purchase or sell real estate, except that the Fund may (i) acquire real estate through ownership of securities or instruments and sell any real estate acquired thereby, (ii) purchase or sell instruments secured by real estate (including interests therein), and (iii) purchase or sell securities issued by entities or investment vehicles that own or deal in real estate (including interests therein).
o May not borrow money or issue senior securities, except that the Fund may sell securities short, enter into reverse repurchase agreements and may otherwise borrow money and issue senior securities as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not purchase or sell commodities or commodities contracts, except to the extent disclosed in the current Prospectus or SAI of the Fund.
o May not act as an underwriter of another issuer's securities, except to the extent that the Fund may be deemed an underwriter within the meaning of the Securities Act in connection with the purchase and sale of portfolio securities.
o May not purchase the securities of any issuer if, as a result, 25% or more (taken at current value) of the Fund's total assets would be invested in the securities of issuers, the principal activities of which are in the same industry; provided, that in replicating the weightings of a particular industry in its target index, the Fund may invest more than 25% of its total assets in securities of issuers in that industry. This limitation
does not apply to securities issued by the U.S. government or its agencies or instrumentalities and obligations issued by state, county or municipal governments. The following industries are considered separate industries for purposes of this investment restriction: electric, natural gas distribution, natural gas pipeline, combined electric and natural gas, telephone utilities, captive borrowing conduit, equipment finance, premium finance, leasing finance, consumer finance and other finance.
The following are the NON-FUNDAMENTAL operating policies of the Funds,
which MAY BE CHANGED by the Board of Trustees of the Trust WITHOUT SHAREHOLDER
APPROVAL:
Each Fund may not:
o Purchase securities on margin, except that the Funds may use margin to the extent necessary to engage in short sales of securities and to obtain such short-term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with options, futures contracts, options on futures contracts, and transactions in currencies or other derivative instruments shall not constitute purchasing securities on margin.
o Purchase or otherwise acquire any security if, as a result, more than 15% of its net assets would be invested in securities that are illiquid.
o Pledge, mortgage or hypothecate any assets owned by the Fund except as may be necessary in connection with permissible borrowings or investments and then such pledging, mortgaging, or hypothecating may not exceed 33-1/3% of the Fund's total assets at the time of the borrowing or investment
If any percentage restriction or requirement described above is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in net asset value will not constitute a violation of such restriction or requirement. However, should a change in net asset value or other external events cause the Fund's investments in illiquid securities including repurchase agreements with maturities in excess of seven days, to exceed the limit set forth above for the Fund's investment in illiquid securities, the Fund will act to cause the aggregate amount of such securities to come within such limit as soon as is reasonably practicable. In such an event, however, the Fund would not be required to liquidate any portfolio securities where the Fund would suffer a loss on the sale of such securities.
The investment objectives of the Funds are not fundamental and may be changed by the Board of Trustees without shareholder approval.
INTERNAL REVENUE CODE RESTRICTIONS
In addition to the investment restrictions above, the Funds must be
diversified according to Code requirements. Specifically, at each tax quarter
end, the Funds' holdings must be diversified so that (1) at least 50% of the
market value of its total assets is represented by cash, cash items (including
receivables), U.S. government securities, securities of other U.S. regulated
investment companies, and other securities, limited so that no one issuer has a
value greater than 5% of the value of the Funds' total assets and that the Funds
hold no more than 10% of the outstanding voting securities of such issuer, and
(2) not more than 25% of the value of the Funds' total assets is invested in the
securities (other than those of the U.S. government or other U.S. regulated
investment companies) of any one issuer, or of two or more issuers which the
Fund controls and which are engaged in the same, similar, or related trades or
businesses, or the securities of one or more qualified publicly traded
partnerships.
s DISCLOSURE OF PORTFOLIO HOLDINGS
The Board of Trustees of the Trust has adopted policies and procedures regarding the disclosure of portfolio holdings information to protect the interests of Fund shareholders and to address potential conflicts of interest that could arise between the interests of Fund shareholders and the interests of the Funds' investment advisers, principal underwriter or affiliated persons of the Funds' investment advisers or principal underwriter. The Trust's overall policy with respect to the release of portfolio holdings is to release such information consistent with
applicable legal requirements and the fiduciary duties owed to shareholders. Subject to the limited exceptions described below, the Trust will not make available to anyone non-public information with respect to its portfolio holdings until such time as the information is made available to all shareholders or the general public.
The policies and procedures are applicable to the Funds' respective investment advisers and any subadviser to the Funds. Pursuant to the policy, the Funds, their investment advisers, any subadviser, and their agents are obligated to:
o Act in the best interests of Fund shareholders by protecting non-public and potentially material portfolio holdings information;
o Ensure that portfolio holdings information is not provided to a favored group of clients or potential clients; and
o Adopt such safeguards and controls around the release of client information so that no client or group of clients is unfairly disadvantaged as a result of such release.
Portfolio holdings information that is not publicly available will be released selectively only pursuant to the exceptions described below. In most cases, where an exception applies, the release of portfolio holdings is strictly prohibited until the information is at least 15 calendar days old. Nevertheless, the adviser's Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate may authorize, where circumstances dictate, the release of more current portfolio holdings information.
Each Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC. The Funds disclose their complete portfolio holdings information to the SEC using Form N-Q within 60 days of the end of the first and third quarter ends of the Funds' fiscal year and on Form N-CSR on the second and fourth quarter ends of the Funds' fiscal year. Form N-Q is not required to be mailed to shareholders, but is made public through the SEC's electronic filings. Shareholders receive either complete portfolio holdings information or summaries of Fund portfolio holdings with their annual and semi-annual reports.
Exceptions to the portfolio holdings release policy described above can only be authorized by the adviser's Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate and will be made only when:
o A Fund has a legitimate business purpose for releasing portfolio holdings information in advance of release to all shareholders or the general public;
o The recipient of the information provides written assurances that the non-public portfolio holdings information will remain confidential and that persons with access to the information will be prohibited from trading based on the information; and
o The release of such information would not otherwise violate the antifraud provisions of the federal securities laws or the Funds' fiduciary duties.
Under this policy, the receipt of compensation by a Fund, an investment adviser, a subadviser, or an affiliate as consideration for disclosing non-public portfolio holdings information will not be deemed a legitimate business purpose.
Eligible third parties to whom portfolio holdings information may be released in advance of general release include the following:
o Data consolidators (including ratings agencies);
o Fund rating/ranking services and other data providers; and
o Service providers to the Funds.
The Funds' investment advisers conduct periodic reviews of compliance with the policy and the Funds' Chief Compliance Officer provides annually a report to the Board of Trustees regarding the operation of the policy and
any material changes recommended as a result of such review. The investment advisers' compliance staff will also annually submit to the Board a list of exceptions granted to the policy, including an explanation of the legitimate business purpose of the Fund that was served as a result of the exception.
TRUSTEES AND OFFICERS OF THE TRUST
Management Information
Trustees who are not Interested Persons (as defined in the 1940 Act) of the Trust.
===================================================================================================================
(1) (2) (3) (4) (5)
===================================================================================================================
Number of
Position(s) Portfolios in
Held with Fund
Fund and Complex
Name, Address, and Year Length of Time Principal Occupation(s) Overseen by Other Directorships
of Birth Served* During Past 5 Years Trustee Held by Trustee**
===================================================================================================================
Charles E. Allen Trustee since Mr. Allen is Chairman, Chief 89 None
July 2000 Executive Officer and
c/o NWD Investment President of Graimark Realty
Management, Inc. Advisors, Inc. (real estate
1200 River Road, development, investment and
Suite 1000, asset management).
Conshohocken, PA 19428
1948
===================================================================================================================
Paula H.J. Cholmondeley Trustee since Ms. Cholmondeley was Vice 89 Director of Dentsply
July 2000 President and General International, Inc.
c/o NWD Investment Manager Sappi Fine Paper (dental products),
Management, Inc. North America from April Ultralife Batteries,
1200 River Road, 2000 through December 2003. Inc., Albany
Suite 1000, International Corp.
Conshohocken, PA 19428 (paper industry),
Terex Corporation
1947 (construction
equipment), and
Minerals Technology
Inc. (specialty
chemicals)
===================================================================================================================
C. Brent DeVore*** Trustee since Dr. DeVore is President of 89 None
1990 Otterbein College.
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1940
===================================================================================================================
|
===================================================================================================================
(1) (2) (3) (4) (5)
===================================================================================================================
Number of
Position(s) Portfolios in
Held with Fund
Fund and Complex
Name, Address, and Year Length of Time Principal Occupation(s) Overseen by Other Directorships
of Birth Served* During Past 5 Years Trustee Held by Trustee**
===================================================================================================================
Phyllis Kay Dryden Trustee since Ms. Dryden was a partner of 89 None
December 2004 Mitchell Madison, a
c/o NWD Investment management consulting
Management, Inc. company from January 2006
1200 River Road, until December 2006; she is
Suite 1000, currently a consultant with
Conshohocken, PA 19428 the company. Ms. Dryden was
formerly Managing Partner of
1947 marchFIRST, a global
management consulting firm.
===================================================================================================================
Barbara L. Hennigar Trustee since Retired. 89 None
July 2000
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1935
===================================================================================================================
Barbara I. Jacobs Trustee since Ms. Jacobs served as 89 None
December 2004 Chairman of the Board of
c/o NWD Investment Directors of KICAP Network
Management, Inc. Fund, a European (United
1200 River Road, Kingdom) hedge fund, from
Suite 1000, January 2001 to January
Conshohocken, PA 19428 2006. From 1988-2003, Ms.
Jacobs was also a Managing
1950 Director and European
Portfolio Manager of CREF
Investments (Teachers
Insurance and Annuity
Association -- College
Retirement Equities Fund).
===================================================================================================================
|
===================================================================================================================
(1) (2) (3) (4) (5)
===================================================================================================================
Number of
Position(s) Portfolios in
Held with Fund
Fund and Complex
Name, Address, and Year Length of Time Principal Occupation(s) Overseen by Other Directorships
of Birth Served* During Past 5 Years Trustee Held by Trustee**
===================================================================================================================
Douglas F. Kridler Trustee since Mr. Kridler has served as 89 None
September 1997 the President and Chief
c/o NWD Investment Executive Officer of the
Management, Inc. Columbus Foundation, (a
1200 River Road, Columbus, OH-based
Suite 1000, foundation which manages
Conshohocken, PA 19428 over 1,300 individual
endowment funds) since
1955 February 2002. Prior to
January 31, 2002, Mr.
Kridler was the President of
the Columbus Association for
the Performing Arts and
Chairman of the Greater
Columbus Convention and
Visitors Bureau.
===================================================================================================================
Michael D. McCarthy Trustee since Retired. Mr. McCarthy was 89 None
December 2004 Chairman of VMAC (Commodity
c/o NWD Investment Swaps) from October 2002
Management, Inc. until January 2007, and a
1200 River Road, partner of Pineville
Suite 1000, Properties LLC (a commercial
Conshohocken, PA 19428 real estate development
firm) from September 2000
1947 until January 2007.
===================================================================================================================
David C. Wetmore Trustee since Retired. 89 None
1995
c/o NWD Investment and Chairman
Management, Inc. since February
1200 River Road, 2005
Suite 1000,
Conshohocken, PA 19428
1948
===================================================================================================================
|
* Length of time served includes time served with the Trust's predecessors
** Directorships held in (1) any other investment companies registered under
the 1940 Act, (2) any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or (3) any company subject to the requirements of
Section 15(d) of the Exchange Act.
*** Mr. DeVore has served as President of Otterbein College since 1984. Mark Thresher, President and Chief Operating Officer of Nationwide Financial Services, Inc. ("NFS") has served as a member of the Board of Trustees of Otterbein College since 2000, currently serving as one of 30 of its trustees, and is currently one of two Vice Chairmen of the Board. NFS is under common control with each of the companies that serves as an investment adviser or principal underwriter to the Trust, as each is a majority-owned subsidiary of Nationwide Corporation ("NC") and, through NC, of Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%).
Trustees who are Interested Persons (as defined in the 1940 Act) and Officers of the Funds
===========================================================================================================================
(1) (2) (3) (4) (5)
===========================================================================================================================
Position(s) Number of
Held with Portfolios in
Fund and Fund
Length of Complex
Name, Address, and Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served(1) During Past 5 Years Trustee Held by Trustee(3)
===========================================================================================================================
Arden L. Shisler Trustee since Retired; Mr. Shisler is the 89 Director of
February 2000 former President and Chief Nationwide Financial
NWD Investment Executive Officer of KeB Services, Inc. (2)
Management, Inc. Transport, Inc., a trucking
1200 River Road, firm (2000 through 2002). He
Suite 1000, served as a consultant to KeB
Conshohocken, PA 19428 from January 2003 through
December 2004. Since 1992, Mr.
1941 Shisler has also been Chairman
of the Board for Nationwide
Mutual Insurance Company(2).
===========================================================================================================================
|
===========================================================================================================================
(1) (2) (3) (4) (5)
===========================================================================================================================
Position(s) Number of
Held with Portfolios in
Fund and Fund
Length of Complex
Name, Address, and Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served(1) During Past 5 Years Trustee Held by Trustee(3)
===========================================================================================================================
John H. Grady President and Mr. Grady is President and 89 None
Chief Chief Executive Officer of NWD
NWD Investment Executive Investment Group, the asset
Management, Inc. Officer management operations of
1200 River Road, since Nationwide Mutual Insurance
Suite 1000, December 2006 Company, which includes
Conshohocken, PA 19428 Gartmore Mutual Fund Capital
Trust, (2) Gartmore Morley
Capital Management, Inc.,
(2)NorthPointe Capital LLC,
1961 (2) Gartmore SA Capital Trust,
(2) Gartmore Investor
Services, Inc. (2) and
Gartmore Distribution
Services, Inc. 2 From March
2004 until March 2006, Mr.
Grady was Chief Executive
Officer of Constellation
Investment Management Co., L.P
(registered investment
adviser), and President and
Chief Executive Officer of
Constellation Funds Group
(registered investment
companies). He also was
President of Constellation
Investment Distribution Co.,
Inc. (registered
broker-dealer) from March 2004
until June 2006. From February
2001 until February 2004, Mr.
Grady was Chief Operating and
Chief Legal Officer; Managing
Director, Mutual Funds Group,
Turner Investment Partners,
Inc. (registered investment
adviser); Executive Vice
President of Turner Funds and
Turner Institutional
Portfolios (registered
investment companies); and
President, Turner Investment
Distributors, Inc. (registered
broker-dealer).
===========================================================================================================================
|
===========================================================================================================================
(1) (2) (3) (4) (5)
===========================================================================================================================
Position(s) Number of
Held with Portfolios in
Fund and Fund
Length of Complex
Name, Address, and Time Principal Occupation(s) Overseen by Other Directorships
Year of Birth Served(1) During Past 5 Years Trustee Held by Trustee(3)
===========================================================================================================================
Gerald J. Holland Treasurer Mr. Holland is Senior Vice N/A None
since March President - Operations for NWD
NWD Investment 2001 Investment Management, Inc.
Management, Inc. ("NWD")(2).
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1951
===========================================================================================================================
Michael A. Krulikowski Chief Since November 1999, Mr. N/A None
Compliance Krulikowski has served as a
NWD Investment Officer since Vice President and Chief
Management, Inc. June 2004 Compliance Officer of NWD.3
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1959
===========================================================================================================================
Eric E. Miller Secretary Mr. Miller is Senior Vice N/A None
since President, General Counsel,
NWD Investment Management, December 2002 and Assistant Secretary for
Inc. NWD (3).
1200 River Road
Suite 1000,
Conshohocken, PA 19428
1953
==========================================================================================================================
|
(1) Length of time served includes time served with the Trust's predecessors.
(2) This position is held with an affiliated person or principal underwriter of the Funds.
(3) Directorships held in: (1) any other investment company registered under the 1940 Act, (2) any company with a class of securities registered pursuant to Section 12 of the Exchange Act or (3) any company subject to the requirements of Section 15(d) of the Exchange Act.
RESPONSIBILITIES OF THE BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of its Board of Trustees. The Board of Trustees sets and reviews policies regarding the operation of the Trust, and directs the officers to perform the daily functions of the Trust.
BOARD OF TRUSTEE COMMITTEES
The Board of Trustees has four standing committees: Audit, Valuation and Operations, Nominating and Fund Governance and Performance Committees.
The purposes of the Audit Committee are to: (a) oversee the Trust's
accounting and financial reporting policies and practices, its internal controls
and, as appropriate, the internal controls of certain of its service providers;
(b) oversee the quality and objectivity of the Trust's financial statements and
the independent audit thereof; (c) ascertain the independence of the Trust's
independent auditors; (d) act as a liaison between the Trust's independent
auditors and the Board; (e) approve the engagement of the Trust's independent
auditors to (i) render audit and non-audit services for the Trust and (ii)
render non-audit services for the Trust's investment advisers (other than a
subadviser whose role is primarily portfolio management and is overseen by
another investment adviser) and certain other entities under common control with
one of the Trust's investment advisers if the engagement relates to the Trust's
operations and financial reporting; (f) meet and consider the reports of the
Trust's independent auditors; (g) review and make recommendations to the Board
regarding the Code of Ethics of the Trust and that of all Trust advisers,
subadvisers, and principal underwriters and annually review changes to,
violations of, and certifications with respect to such Code of Ethics; and (h)
oversee the Trust's written policies and procedures adopted under Rule 38a-1 of
the 1940 Act and oversee the appointment and performance of the Trust's
designated Chief Compliance Officer. The function of the Audit Committee is
oversight; it is management's responsibility to maintain appropriate systems for
accounting and internal control, and the independent auditors' responsibility to
plan and carry out a proper audit. The independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of the
Trust's shareholders. Each of the members have a working knowledge of basic
finance and accounting matters and are not interested persons of the Trust, as
defined in the 1940 Act. This Committee met six times during the past fiscal
year and currently consists of the following Trustees: Mr. Allen, Ms.
Cholmondeley (Chairperson), Ms. Jacobs and Mr. Wetmore.
The purposes of the Valuation and Operations Committee are to (a) oversee the
implementation and operation of the Trust's Valuation Procedures, applicable to
all of the Trust's portfolio securities; (b) oversee the implementation and
operation of the Trust's Rule 2a-7 Procedures, applicable to the Trust's money
market fund series; (c) oversee the Trust's portfolio brokerage practices; and
(d) oversee distribution of the Trust's shares of beneficial interest. The
Valuation and Operations Committee met five times during the past fiscal year
and currently consists of the following Trustees: Mr. DeVore, Ms. Dryden, Ms.
Hennigar, Mr. Kridler (Chairman), and Mr. McCarthy, each of whom is not an
interested person of the Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has the following powers and responsibilities: (1) selection and nomination of all persons for election or appointment as Trustees of the Trust (provided that nominees for independent Trustee are recommended for selection and approval by all of the incumbent independent Trustees then serving on the Board); (2) periodic review of the composition of the Board to determine whether it may be appropriate to add individuals with specific backgrounds, diversity or skill sets; (3) periodic review of Board governance procedures (including the Board's effectiveness, Trustee retirement, Trustee investment in the Funds and the process by which the Trust's principal service providers are evaluated); (4) review of completed Trustee and Officer Questionnaires and adjust composition of Board by recommending the removal, replacement, or retirement of an incumbent Trustee and may recommend the selection and nomination of an appropriate candidate; (5) oversee the implementation of the Board's policies regarding evaluations of the Board and Trustee peer evaluations; (6) review and make recommendations to the Board regarding the Proxy Voting Guidelines, Policies and Procedures of all Trust advisers and subadvisers; (7) periodic review of Trustee compensation and recommend appropriate changes to the Independent Trustees; (8) oversee implementation of the Trust's Policy Regarding the Service by Trustees on the Boards of Directors of Public Companies and Unaffiliated Fund Companies; (9) annual review and make recommendations to the Board regarding the Board's Statements of Policies Regarding the Enhanced Fund Governance and Oversight By, the Enhanced Independence of, & the Enhanced Effectiveness of the Board of Trustees; and (10) monitoring of the performance of legal counsel employed by the independent Trustees, supervision of counsel for the independent Trustees and monitoring of the performance of legal counsel to the Trust, in consultation with the Trust's management. The Nominating and Fund Governance Committee reports to the full Board with recommendations of any appropriate changes to the Board. This Committee met seven times during the past fiscal year and currently consists of the following Trustees: Mr. DeVore (Chairman), Ms. Cholmondeley, Ms. Dryden, Mr. Kridler, and Mr. Wetmore, each of whom is not an interested person of the Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has adopted procedures regarding its review of recommendations for trustee nominees, including those recommendations presented by shareholders. When
considering whether to add additional or substitute Trustees to the Board of
Trustees of the Trust, the Trustees shall take into account any proposals for
candidates that are properly submitted to the Trust's Secretary. Shareholders
wishing to present one or more candidates for Trustee for consideration may do
so by submitting a signed written request to the Trust's Secretary at attn:
Secretary, Gartmore Mutual Funds, 1200 River Road, Suite 1000, Conshohocken,
Pennsylvania 19428, which includes the following information: (i) name and
address of shareholder and, if applicable, name of broker or record holder; (ii)
number of shares owned; (iii) name of Fund(s) in which shares are owned; (iv)
whether the proposed candidate(s) consent to being identified in any proxy
statement utilized in connecting with the election of Trustees; (v) the name and
background information of the proposed candidates and (vi) a representation that
the candidate or candidates are willing to provide additional information about
themselves, including assurances as to their independence.
The functions of the Performance Committee are: (1) in consultation with
management of the Trust, to review the kind, scope and format of, and the time
periods covered by, the investment performance data and related reports provided
to the Board and, if the Committee determines that changes to such data or
reports would be appropriate and practicable, the Committee will work with
management of the Trust to implement any such changes; (2) in consultation with
management of the Trust, to review the investment performance benchmarks and
peer groups used in reports delivered to the Board for comparison of investment
performance of the Funds and, if the Committee determines that changes to such
benchmarks or peer groups would be appropriate, the Committee will work with
management to implement any such change; (3) in consultation with management of
the Trust, to review such other matters that affect performance, including for
example, fee structures, expense ratios, as the Committee deems to be necessary
and appropriate and work with management to implement any recommended changes;
(4) to review and monitor the performance of the Trust's funds and the fund
family, as a whole, in the manner and to the extent directed by the Board of
Trustees, recognizing that the ultimate oversight of fund performance shall
remain with the full Board of Trustees; (5) to review and monitor the structure
of, and the method used to determine, the compensation of each portfolio manager
of the Trust's funds with respect to management of the Trust's funds and any
other account managed by the portfolio manager; and (6) to review and monitor
material conflicts of interest that may arise from a portfolio manager's
management of multiple accounts.. This Committee met four times during the past
fiscal year and currently consists of the following Trustees: Ms. Hennigar
(Chairperson), Mr. Allen, Ms. Jacobs, Mr. McCarthy, and Mr. Shisler.
OWNERSHIP OF SHARES OF GARTMORE MUTUAL FUNDS AS OF DECEMBER 31, 2006
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES AND/OR SHARES
DOLLAR RANGE OF EQUITY IN ALL REGISTERED INVESTMENT
SECURITIES AND/OR SHARES IN THE COMPANIES OVERSEEN BY TRUSTEE IN
NAME OF TRUSTEE FUNDS FAMILY OF INVESTMENT COMPANIES
Charles E. Allen None $10,001-$50,000
Paula H.J. Cholmondeley None $50,001-$100,000
C. Brent DeVore None Over $100,000
Phyllis Kay Dryden None $10,001-$50,000
Barbara L. Hennigar None $10,001-$50,000
Barbara I. Jacobs None $50,001-$100,000
Douglas F. Kridler None Over $100,000
Michael D. McCarthy None Over $100,000
David C. Wetmore None Over $100,000
Arden L. Shisler None Over $100,000
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OWNERSHIP IN THE TRUST'S INVESTMENT ADVISERS(1), SUBADVISERS(2) OR DISTRIBUTOR(3) AS OF DECEMBER 31, 2006
TRUSTEES WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) OF THE FUNDS
NAME OF
OWNERS AND
RELATIONSHIPS NAME OF TITLE OF CLASS OF VALUE OF
NAME OF TRUSTEE TO TRUSTEE COMPANY SECURITY SECURITIES PERCENT OF CLASS
Charles E. Allen N/A N/A N/A None N/A
Paula H.J. N/A N/A N/A None N/A
Cholmondeley C. Brent DeVore N/A N/A N/A None N/A
Phyllis Kay Dryden N/A N/A N/A None N/A
Barbara L. Hennigar N/A N/A N/A None N/A
Barbara I. Jacobs N/A N/A N/A None N/A
Douglas F. Kridler N/A N/A N/A None N/A
Michael D. McCarthy N/A N/A N/A None N/A
David C. Wetmore N/A N/A N/A None N/A
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(1) Investment advisers for all of the Trust's funds include Gartmore Mutual Fund Capital Trust and Gartmore Morley Capital Management, Inc.
(2) Subadvisers for other funds not in this SAI include Gartmore Global Partners and NorthPointe Capital, LLC, and BlackRock Investment Management, LLC (formerly known as Fund Asset Management, L.P.)
(3) Gartmore Distribution Services, Inc., or any company, other than an investment company, that controls the Fund's adviser or distributor.
Compensation of Trustees
The Trustees receive fees and reimbursement for expenses of attending board meetings from the Trust. Each Adviser, based upon a pro rata share for the Funds for which it acts as investment adviser, reimburses the Trust for fees and expenses paid to Trustees who are interested persons of the Trust and who are employees of an adviser or its affiliates. The Compensation Table below sets forth the total compensation paid to the Trustees of the Trust, before reimbursement of expenses, for the fiscal year ended October 31, 2006. In addition, the table sets forth the total compensation to be paid to the Trustees from all funds in the Fund Complex for the twelve months ended October 31, 2006. Trust officers receive no compensation from the Trust in their capacity as officers.
====================================================================================================================
(1) (2) (3) (4) (5)
====================================================================================================================
Pension
Retirement
Aggregate Benefits Accrued Estimated Annual
Compensation as Part of Trust Benefits Upon Total Compensation from the
Name of Trustee from the Trust Expenses Retirement Fund Complex*
====================================================================================================================
Charles E. Allen $65,375 $0 $0 $131,000
====================================================================================================================
Paula H.J. Cholmondeley $62,875 $0 $0 $126,000
====================================================================================================================
C. Brent DeVore $57,125 $0 $0 $114,250
====================================================================================================================
Phyllis Kay Dryden $64,000 $0 $0 $128,000
====================================================================================================================
Barbara L. Hennigar $57,125 $0 $0 $114,250
====================================================================================================================
Barbara I. Jacobs $67,375 $0 $0 $133,750
====================================================================================================================
Douglas F. Kridler $56,125 $0 $0 $112,250
====================================================================================================================
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====================================================================================================================
(1) (2) (3) (4) (5)
====================================================================================================================
Pension
Retirement
Aggregate Benefits Accrued Estimated Annual
Compensation as Part of Trust Benefits Upon Total Compensation from the
Name of Trustee from the Trust Expenses Retirement Fund Complex*
====================================================================================================================
====================================================================================================================
Michael D. McCarthy $52,625 $0 $0 $106,250
====================================================================================================================
Arden L. Shisler $46,750 $0 $0 $93,500
====================================================================================================================
David C. Wetmore $86,125 $0 $0 $172,500
====================================================================================================================
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* On October 31, 2006 the Fund Complex included two trusts comprised of 89 investment company funds or series.
The Trust does not maintain any pension or retirement plans for the Officers or Trustees of the Trust.
Code of Ethics
Federal law requires the Trust, each of its investment advisers and sub-advisers, and its principal underwriter to adopt codes of ethics which govern the personal securities transactions of their respective personnel. Accordingly, each such entity has adopted a code of ethics pursuant to which their respective personnel may invest in securities for their personal accounts (including securities that may be purchased or held by the Trust). Copies of these Codes of Ethics are on file with the SEC and are available to the public.
INVESTMENT ADVISORY AND OTHER SERVICES
Trust Expenses
The Trust pays the compensation of the Trustees who are not employees of NWD Investment Management, Inc. ("NWDIMI"), or its affiliates, and all expenses (other than those assumed by the adviser), including governmental fees, interest charges, taxes and membership dues in the Investment Company Institute allocable to the Trust; investment advisory fees and any Rule 12b-1 fees; fees under the Trust's Fund Administration Agreement which includes the expenses of calculating the Funds' net asset values; fees and expenses of independent certified public accountants, legal counsel, and any transfer agent, registrar, and dividend disbursing agent of the Trust; expenses of preparing, printing, and mailing shareholders' reports, notices, proxy statements, and reports to governmental offices and commissions; expenses connected with the execution, recording, and settlement of portfolio security transactions; insurance premiums; fees and expenses of the custodian for all services to the Trust; expenses of calculating the net asset value of shares of the Trust; expenses of shareholders' meetings; and expenses relating to the issuance, registration, and qualification of shares of the Trust. Gartmore Mutual Fund Capital Trust ("GMFCT" or "the Adviser") may, from time to time, agree to voluntarily or contractually waive advisory fees, and if necessary reimburse expenses, in order to limit total operating expenses for the Funds and/or classes, as described below. These expense limitations apply to the classes described; if a particular class is not referenced, there is no expense limitation for that class.
Investment Advisers
Under an Investment Advisory Agreement with the Trust, GMFCT manages the Funds in accordance with the policies and procedures established by the Trustees. GMFCT manages the day-to day investments of the Funds. GMFCT pays the compensation of the officers of the Trust employed by GMFCT and pays a pro rata portion of the compensation and expenses of the Trustees who are employed by NWDIMI and its affiliates. GMFCT also furnishes, at its own expense, all necessary administrative services, office space, equipment, and clerical personnel for servicing the investments of the Trust and maintaining its investment advisory facilities, and executive and supervisory personnel for managing the investments and effecting the portfolio transactions of the Trust. In addition, GMFCT pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other
financial institutions in exchange for their selling of shares of the Trust's series or for recordkeeping or other shareholder related services.
The Investment Advisory Agreement also specifically provides that GMFCT, including its directors, officers, and employees, shall not be liable for any error of judgment, or mistake of law, or for any loss arising out of any investment, or for any act or omission in the execution and management of the Trust, except for willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties under the Agreement. The Agreement continues in effect for an initial period of one year and thereafter shall continue automatically for successive annual periods provided such continuance is specifically approved at least annually by the Trustees, or by vote of a majority of the outstanding voting securities of the Trust, and, in either case, by a majority of the Trustees who are not parties to the Agreement or interested persons of any such party. The Agreement terminates automatically in the event of its "assignment," as defined under the 1940 Act. It may be terminated as to a Fund without penalty by vote of a majority of the outstanding voting securities of the Fund, or by either party, on not less than 60 days written notice. The Agreement further provides that GMFCT may render similar services to others.
GMFCT, located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is a wholly-owned subsidiary of NWD Investment Management, Inc., a holding company which is an indirect, majority-owned subsidiary of NWD Management & Research Trust ("NWD MRT"), also located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428. NWD MRT is a wholly-owned subsidiary of Nationwide Corporation. All of the common stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders.
On February 2, 2007, Nationwide Corporation ("Nationwide Corp."), the parent company of GMFCT, entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase GMFCT (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with GMFCT. The purchase of GMFCT by NFS may be deemed to constitute a change of control, terminating GMFCT's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with GMFCT with respect to the Funds, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with GMFCT are subject to the approval of the Fund's respective shareholders and will take effect upon the sale of GMFCT to NFS, which is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management plc (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
For services provided under the Investment Advisory Agreement, GMFCT receives an annual fee paid monthly based on average daily net assets of the applicable Fund according to the following schedule:
FUND ASSETS INVESTMENT ADVISORY FEE
Gartmore Small Cap Growth Opportunities $0 up to $500 million 0.95%
Fund and Gartmore Small Cap Value Fund $500 million up to $2 billion 0.85%
$2 billion and over 0.80%
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Limitation of Fund Expenses
Gartmore Mutual Fund Capital Trust
In the interest of limiting the expenses of the Funds, GMFCT may from time to time waive some or all of its investment advisory fee or reimburse other fees for the Funds. In this regard, GMFCT has entered into expense
limitation agreements with the Trust on behalf of the Funds ("Expense Limitation Agreements"). Pursuant to the Expense Limitation Agreements, GMFCT has agreed to waive or limit its fees and to assume other expenses (except for Rule 12b-1 fees and administrative services fees and other expenses listed below) to the extent necessary to limit the total annual operating expenses of each Class of the Funds to the limits described below. Please note that the waiver of such fees will cause the total return and yield of the Funds to be higher than they would otherwise be in the absence of such a waiver.
GMFCT may request and receive reimbursement from the Funds for the
advisory fees waived or limited and other expenses reimbursed by GMFCT pursuant
to the Expense Limitation Agreements at a later date when a Fund has reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual operating expense ratio of the Fund to exceed the limits in the
Expense Limitation Agreement. No reimbursement will be made to a Fund unless:
(i) the Fund's assets exceed $100 million; (ii) the total annual expense ratio
of the Class making such reimbursement is less than the limit set forth below;
(iii) the payment of such reimbursement is approved by the Board of Trustees on
a quarterly basis; and (iv) the payment of such reimbursement is made no more
than three years from the fiscal year in which the corresponding reimbursement
to the Fund was made. Except as provided for in the Expense Limitation
Agreement, reimbursement of amounts previously waived or assumed by GMFCT is not
permitted.
Until at least February 28, 2008, GMFCT has agreed contractually to waive advisory fees and, if necessary, reimburse expenses for each Fund in order to limit total annual fund operating expenses to 1.35% for all share classes of the Funds, excluding any taxes, interest, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, short-sale dividend expenses, Rule 12b-1 fees, fees paid pursuant to the Administrative Services Plan, other expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary expenses.
Investment Advisory Fees
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GMFCT earned the following fees for investment advisory services:
2006
----
Fees Fees
Fund Earned(1) Reimbursed
---- --------- ----------
Gartmore Small Cap Growth
Opportunities Fund $0 $4,691
Gartmore Small Cap Value Fund $0 $4,691
(1) Fees net of reimbursement.
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Multi-Manager Structure
The Adviser and the Trust have received from the SEC an exemptive order for a multi-manager structure which allows the Adviser to hire, replace or terminate subadvisers without the approval of shareholders; the order also allows the Adviser to revise a subadvisory agreement without shareholder approval. If a subadviser is hired, the change will be communicated to shareholders within 90 days of such change, and the change will be approved by the Trust's Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust or the Adviser. The order is intended to facilitate the efficient operation of the Funds and afford the Trust increased management flexibility.
The Adviser provides investment management evaluation services to the Funds principally by performing initial due diligence on prospective subadvisers for the Funds and thereafter monitoring the performance of the subadviser through quantitative and qualitative analysis as well as periodic in-person, telephonic and written consultations with the subadviser. The Adviser has responsibility for communicating performance expectations and
evaluations to the Subadviser and ultimately recommending to the Trust's Board of Trustees whether the subadviser's contract should be renewed, modified or terminated; however, the Adviser does not expect to recommend frequent changes of subadvisers. The Adviser will regularly provide written reports to the Trust's Board of Trustees regarding the results of their evaluation and monitoring functions. Although the Adviser will monitor the performance of the subadvisers, there is no certainty that the subadvisers or the Funds will obtain favorable results at any given time.
Portfolio Managers
Appendix C contains the following information regarding the portfolio manager identified in the Funds' Prospectus: (i) the dollar range of the portfolio manager's investments in each Fund; (ii) a description of the portfolio manager's compensation structure; and (iii) information regarding other accounts managed by the portfolio manager and potential conflicts of interest that might arise from the management of multiple accounts.
Distributor
Gartmore Distribution Services, Inc. ("GDSI" or the "Distributor")) serves as underwriter for each of the Funds in the continuous distribution of its shares pursuant to an Underwriting Agreement amended as of February 28, 2007 (the "Underwriting Agreement"). Unless otherwise terminated, the Underwriting Agreement will continue for an initial period of two years and from year to year thereafter for successive annual periods, if, as to each Fund, such continuance is approved at least annually by (i) the Trust's Board of Trustees or by the vote of a majority of the outstanding shares of that Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to the Underwriting Agreement or interested persons (as defined in the 1940 Act) of any party to the Underwriting Agreement, cast in person at a meeting called for the purpose of voting on such approval. The Underwriting Agreement may be terminated in the event of any assignment, as defined in the 1940 Act. GDSI is a wholly-owned subsidiary of Nationwide Asset Management, Inc. ("NAMI"), a Delaware holding company. NAMI is a wholly-owned subsidiary of Gartmore SA Capital Trust, which is an investment adviser and is wholly-owned by NWDIMI, a Delaware holding company. NWDIMI is a wholly owned, indirect subsidiary of NWD MRT. The following entities or people are affiliates of the Trust and are also affiliates of GDSI:
GMFCT
NWD MRT
Gartmore SA Capital Trust
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
Nationwide Corporation
Nationwide Mutual Insurance Company
John H. Grady
Michael A. Krulikowski
Gerald J. Holland
Eric E. Miller
In its capacity as Distributor, GDSI solicits orders for the sale of Shares, advertises and pays the costs of distribution, advertising, office space and the personnel involved in such activities. GDSI receives no compensation under the Underwriting Agreement with the Trust, but may retain all or a portion of the sales charge and 12b-1 fee, if any, imposed upon sales of Shares of each of the Funds.
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GDSI received the following commissions from the sale of shares of the Funds:
-------------------------------------------------------------
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-------------------
Year ended
Funds October 31, 2006
----- ----------------
--------------------------------------------------------------------------------
Gartmore Small Cap Growth Opportunities Fund $0
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund $0
--------------------------------------------------------------------------------
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GDSI also receives the proceeds of contingent deferred sales charges imposed on certain redemptions of Class B, Class C, and certain Class A shares. For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GDSI received the following amounts from such sales charges:
-------------------------------------------------------------
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-------------------
Year ended
Funds October 31, 2006
----- ----------------
--------------------------------------------------------------------------------
Gartmore Small Cap Growth Opportunities Fund $0
--------------------------------------------------------------------------------
Gartmore Small Cap Value Fund $0
--------------------------------------------------------------------------------
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Distribution Plan
The Trust, with respect to shares of the Funds, has adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the 1940 Act. The Plan permits the Funds to compensate GDSI, as the Funds' principal underwriter, for expenses associated with the distribution of the Funds' Class A, Class B, Class C, or Class R shares, as applicable. Although actual distribution expenses may be more or less, the Funds, or the applicable class, as indicated below, pay GDSI an annual fee under the Plan, regardless of expenses, in annual amount that will not exceed the following amounts:
0.25% of the average daily net assets of the Fund's Class A shares (distribution or services fee).
1.00% of the average daily net assets of the Fund's Class B shares (0.25% services fee).
1.00% of the average daily net assets of the Fund's Class C shares (0.25% services fee).
0.50% of the average daily net assets of the Fund's Class R shares (0.25% of which may be either a distribution or services fee).
As required by Rule 12b-1, the Plan was approved by the Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan (the "Independent Trustees"). The Plan was initially approved by the Board of Trustees on March 5, 1998. The Plan may be amended from time to time by vote of a majority of the Trustees, including a majority of the Independent Trustees, cast in person at a meeting called for that purpose. The Plan may be terminated as to the applicable shares of a Fund by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding shares of that Class or Fund, as applicable. Any change in the Plan that would materially increase the distribution cost to the applicable shareholders requires shareholder approval. The Trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. For so long as the Plan is in effect, selection and nomination of those Trustees who are not interested persons of the Trust shall be
committed to the discretion of such disinterested persons. All agreements with
any person relating to the implementation of the Plan may be terminated at any
time on 60 days' written notice without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of the majority of the
outstanding applicable shares. The Plan will continue in effect for successive
one-year periods, provided that each such continuance is specifically approved
(i) by the vote of a majority of the Independent Trustees, and (ii) by a vote of
a majority of the entire Board of Trustees cast in person at a meeting called
for that purpose. The Board of Trustees has a duty to request and evaluate such
information as may be reasonably necessary for them to make an informed
determination of whether the Plan should be implemented or continued. In
addition the Trustees in approving the Plan as to the Funds must determine that
there is a reasonable likelihood that the Plan will benefit the Funds and their
Shareholders.
The Board of Trustees of the Trust believes that the Plan is in the best interests of the Funds since it encourages Fund growth and maintenance of Fund assets. As the Funds grow in size, certain expenses, and therefore total expenses per share, may be reduced and overall performance per share may be improved.
GDSI has entered into, and will enter into, from time to time, agreements with selected dealers pursuant to which such dealers will provide certain services in connection with the distribution of the Funds' shares including, but not limited to, those discussed above. GDSI or an affiliate of GDSI pays additional amounts from its own resources to dealers or other financial intermediaries, including its affiliate, NFS or its subsidiaries, for aid in distribution or for aid in providing administrative services to shareholders.
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GDSI earned the distribution fees under the Plan as shown in the following table.
--------------------------------------------------------------------------------------------------------------- Fund Class A Class B Class C Class R --------------------------------------------------------------------------------------------------------------- Gartmore Small Cap Growth $0 $1 $1 $0 Opportunities Fund --------------------------------------------------------------------------------------------------------------- Gartmore Small Cap Value Fund $0 $1 $1 $0 --------------------------------------------------------------------------------------------------------------- |
The Trust has been informed by GDSI that for the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, the following expenditures were made using the 12b-1 fees received by GDSI with respect to the Funds:
----------------------------------------------------------------------------------------------------------------
Financing
Distributor Charges with Broker-Dealer
Prospectus Printing Compensation & respect to B & C Compensation &
Fund & Mailing(1) Costs shares Costs
----------------------------------------------------------------------------------------------------------------
Gartmore Small Cap Growth $0.24 $0 $1.76 $0
Opportunities Fund
----------------------------------------------------------------------------------------------------------------
Gartmore Small Cap Value Fund $0.24 $0 $1.76 $0
----------------------------------------------------------------------------------------------------------------
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(1) Printing and mailing of prospectuses to other than current Fund shareholders.
Fund Administration And Transfer Agency Services
Under the terms of the Fund Administration and Transfer Agency Agreement, Gartmore SA Capital Trust ("GSA"), a wholly-owned subsidiary of NWDIMI, provides for various administrative and accounting services, including daily valuation of the Funds' shares, preparation of financial statements, tax returns, and regulatory reports, and presentation of quarterly reports to the Board of Trustees. NWDIMI is a wholly-owned, indirect subsidiary of NWD MRT. Gartmore Investors Services Inc. ("GISI"), an indirect subsidiary of GSA, serves as transfer agent and dividend disbursing agent for each of the Funds. Both GSA and GISI are located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428. For the fund administration and transfer agency services, the Funds pay GSA and GISI a combined annual fee based on the Trust's average daily net assets according to the following schedule:
AGGREGATE TRUST FEE
AS A PERCENTAGE OF NET
ASSET LEVEL ASSETS
----------- ------
$0 up to $1 billion 0.26%
$1 billion up to $3 billion 0.19%
$3 billion up to $4 billion 0.15%
$4 billion up to $5 billion 0.08%
$5 billion up to $10 billion 0.05%
$10 billion up to $12 billion 0.03%
$12 billion and more 0.02%
|
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, GSA and GISI were paid combined fund administration and transfer agency fees from the Funds as follows:
--------------------------------------------------------------- Fund 2006 --------------------------------------------------------------- Gartmore Small Cap Growth Opportunities Fund $919 --------------------------------------------------------------- Gartmore Small Cap Value Fund $919 --------------------------------------------------------------- |
Sub-Administration
GSA and GISI have entered into a Services Agreement with BISYS Fund Services Ohio, Inc. ("BISYS"), effective November 1, 2001, to provide certain fund administration and transfer agency services for each of the Funds. For these services, GSA pays BISYS an annual fee at the following rates based on the average daily net assets of the aggregate of all the funds of the Trust that BISYS is providing such services for:
AGGREGATE TRUST FEE
AS A PERCENTAGE OF NET
ASSET LEVEL ASSETS
----------- ------
$0 up to $1 billion 0.20%
$1 billion up to $3 billion 0.15%
$3 billion up to $4 billion 0.10%
$4 billion up to $5 billion 0.05%
5 billion up to $10 billion 0.02%
10 billion up to $12 billion 0.01%
$12 billion and more 0.005%
|
BISYS received the following amounts for the sub-administration services and sub-transfer agency services it provided:
Administrative Services Plan
Under the terms of an Administrative Services Plan, the Trust is permitted to enter into Servicing Agreements with servicing organizations, such as broker-dealers and financial institutions, who agree to provide certain administrative support services in connection with the Class A, Class R, and Institutional Service Class shares of the Funds. Such administrative support services include, but are not limited to, the following: establishing and maintaining shareholder accounts, processing purchase and redemption transactions, arranging for bank wires, performing shareholder sub-accounting, answering inquiries regarding the Funds, providing periodic statements
showing the account balance for beneficial owners or for plan participants or contract holders of insurance company separate accounts, transmitting proxy statements, periodic reports, updated prospectuses and other communications to shareholders and, with respect to meetings of shareholders, collecting, tabulating and forwarding to the Trust executed proxies and obtaining such other information and performing such other services as may reasonably be required. With respect to the Class R shares, these types of administrative support services will be exclusively provided for retirement plans and their plan participants.
As authorized by the Administrative Services Plan for the Funds, the Trust has entered into a Servicing Agreement for the Funds pursuant to which NFS has agreed to provide certain administrative support services in connection with the applicable Fund shares held beneficially by its customers. NFS is a majority owned subsidiary of Nationwide Corporation, which also owns NWD MRT. In consideration for providing administrative support services, NFS and other entities with which the Trust may enter into Servicing Agreements (which may include GDSI) will receive a fee, computed at the annual rate of up to 0.25% of the average daily net assets of the Class A, Class R and Institutional Service Class shares of each Fund, respectively.
Custodian
JPMorgan Chase Bank, 4 New York Plaza, New York, New York 10008, is the Custodian for the Trust and makes all receipts and disbursements under a Custodian Agreement. The Custodian performs no managerial or policy making functions for the Funds.
Legal Counsel
Stradley Ronon Stevens & Young, LLP, 2600 One Commerce Square, Philadelphia, Pennsylvania 19103, serves as the Trust's legal counsel.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1700, 2001 Market Street, Philadelphia, Pennsylvania 19103-7042, serves as the Independent Registered Public Accounting Firm for the Trust.
BROKERAGE ALLOCATION
GMFCT (or a subadviser) is responsible for decisions to buy and sell securities and other investments for the Funds, the selection of brokers and dealers to effect the transactions and the negotiation of brokerage commissions, if any. In transactions on stock and commodity exchanges in the United States, these commissions are negotiated, whereas on foreign stock and commodity exchanges these commissions are generally fixed and are generally higher than brokerage commissions in the United States. In the case of securities traded on the over-the-counter markets or for securities traded on a principal basis, there is generally no commission, but the price includes a spread between the dealer's purchase and sale price. This spread is the dealer's profit. In underwritten offerings, the price includes a disclosed, fixed commission or discount. Most short-term obligations are normally traded on a "principal" rather than agency basis. This may be done through a dealer (e.g., a securities firm or bank) who buys or sells for its own account rather than as an agent for another client, or directly with the issuer.
Except as described below, the primary consideration in portfolio security transactions is best price and execution of the transaction (i.e., execution at the most favorable prices and in the most effective manner possible). "Best price-best execution" encompasses many factors affecting the overall benefit obtained by the client account in the transaction including, but not necessarily limited to, the price paid or received for a security, the commission charged, the promptness, availability and reliability of execution, the confidentiality and placement accorded the order, and customer service. Therefore, "best price-best execution" does not necessarily mean obtaining the best price alone but is evaluated in the context of all the execution services provided. GMFCT has complete freedom as to the markets in and the broker-dealers through which it seeks this result.
Subject to the primary consideration of seeking best price-best execution and as discussed below, securities may be bought or sold through broker-dealers who have furnished statistical, research, and other information or services to the Adviser or a subadviser. In placing orders with such broker-dealers, the Adviser will, where possible,
take into account the comparative usefulness of such information. Such information is useful to the Adviser even though its dollar value may be indeterminable, and its receipt or availability generally does not reduce the Adviser's normal research activities or expenses.
There may be occasions when portfolio transactions for the Funds are executed as part of concurrent authorizations to purchase or sell the same security for trusts or other accounts (including other mutual funds) served by the Adviser or by an affiliated company thereof. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to the Funds, they are affected only when the Adviser believes that to do so is in the interest of the Funds. When such concurrent authorizations occur, the executions will be allocated in an equitable manner.
In purchasing and selling investments for the Funds, it is the policy of the Adviser and subadvisers to obtain best execution at the most favorable prices through responsible broker-dealers. The determination of what may constitute best execution in a securities transaction by a broker involves a number of considerations, including the overall direct net economic result to the Funds (involving both price paid or received and any commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction at all when a large block is involved, the availability of the broker to stand ready to execute possibly difficult transactions in the future, the professionalism of the broker, and the financial strength and stability of the broker. These considerations are judgmental and are weighed by the Adviser in determining the overall reasonableness of securities executions and commissions paid. In selecting broker-dealers, the Adviser will consider various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security or asset to be purchased or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer's firm; the broker-dealer's execution services, rendered on a continuing basis; and the reasonableness of any commissions.
The Adviser may cause the Funds to pay a broker-dealer who furnishes brokerage and/or research services a commission that is in excess of the commission another broker-dealer would have received for executing the transaction if it is determined, pursuant to the requirements of Section 28(e) of the Securities Exchange Act of 1934, that such commission is reasonable in relation to the value of the brokerage and/or research services provided. Such research services may include, among other things, analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, analytic or modeling software, market data feeds and historical market information. Any such research and other information provided by brokers to the Adviser is considered to be in addition to and not in lieu of services required to be performed by it under its investment advisory agreement. The fees paid to the Adviser pursuant to its investment advisory agreement are not reduced by reason of its receiving any brokerage and research services. The research services provided by broker-dealers can be useful to the Adviser in serving their other clients. All research services received from the brokers to whom commission are paid are used collectively, meaning such services may not actually be utilized in connection with each client account that may have provided the commission paid to the brokers providing such services. The Adviser is prohibited from considering the broker-dealers sale of shares of the Funds, except as may be specifically permitted by law.
Fund portfolio transactions may be effected with broker-dealers who have assisted investors in the purchase of variable annuity contracts or variable insurance policies issued by Nationwide Life Insurance Company or Nationwide Life & Annuity Insurance Company. However, neither such assistance nor sale of other investment company shares is a qualifying or disqualifying factor in a broker-dealer's selection, nor is the selection of any broker-dealer based on the volume of shares sold.
For the period from September 29, 2006 (commencement of operations of each Fund) to October 31, 2006, the following brokerage commissions were paid by the Funds:
------------------------------------------------------------------- Gartmore Small Cap Value Fund $27,797 ------------------------------------------------------------------- Gartmore Small Cap Growth Opportunities Fund 11,241 ------------------------------------------------------------------- |
As of October 31, 2006, the Funds held investments in securities of their regular broker-dealers as follows:
Approximate Aggregate
Value of Issuer's
Securities Owned by the
Fund as of
fiscal year end Name of
Fund October 31, 2006 Broker or Dealer
---- ---------------- ----------------
Gartmore Small Cap Value Fund $ 26,965 CS First Boston Corp.
Gartmore Small Cap Growth Opportunities Fund 108,874 CS First Boston Corp.
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Under the 1940 Act, "affiliated persons" of the Funds are prohibited from dealing with it as a principal in the purchase and sale of securities unless an exemptive order allowing such transactions is obtained from the SEC. However, the Funds may purchase securities from underwriting syndicates of which an affiliate, as defined in the 1940 Act, is a member under certain conditions, in accordance with Rule 10f-3 under the 1940 Act.
The Funds contemplate that, consistent with the policy of obtaining best
results, brokerage transactions may be conducted through "affiliated
broker/dealers," as defined in the 1940 Act. Under the 1940 Act, commissions
paid by the Funds to an "affiliated broker/dealer" in connection with a purchase
or sale of securities offered on a securities exchange may not exceed the usual
and customary broker's commission. Accordingly, it is the Funds' policy that the
commissions to be paid to an affiliated broker-dealer must, in its judgment, be
(1) at least as favorable as those that would be charged by other brokers having
comparable execution capability and (2) at least as favorable as commissions
contemporaneously charged by such broker/dealer on comparable transactions for
its most favored unaffiliated customers, except for accounts for which the
affiliated broker/dealer acts as a clearing broker for another brokerage firm
and customers of an affiliated broker/dealer considered by a majority of the
independent trustees not to be comparable to the Funds. The Funds do not deem it
practicable and in their best interests to solicit competitive bids for
commissions on each transaction. However, consideration regularly is given to
information concerning the prevailing level of commissions charged on comparable
transactions by other brokers during comparable periods of time.
PURCHASES, REDEMPTIONS AND PRICING OF SHARES
All investments in the Trust are credited to the shareholder's account in the form of full and fractional shares of the designated Fund (rounded to the nearest 1/1000 of a share). The Trust does not issue share certificates.
The NAV per share of each Fund is determined once daily, as of the close of regular trading on the New York Stock Exchange (the "Exchange") (generally 4 P.M. Eastern Time) on each business day the Exchange is open for regular trading (and on such other days as the Board determines). However, to the extent that a Fund's investments are traded in markets that are open when the New York Stock Exchange is closed, the value of the Funds' investments may change on days when shares cannot be purchased or redeemed.
The Trust will not compute NAV for the Funds on customary national business holidays, including the following: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and other days when the New York Stock Exchange is closed.
The Funds reserve the right to not determine NAV when: (i) a Fund has not received any orders to purchase, sell or exchange shares and (ii) changes in the value of the Fund's portfolio do not affect the Fund's net asset value.
The offering price for orders placed before the close of the Exchange, on each business day the Exchange is open for trading, will be based upon calculation of the NAV at the close of regular trading on the Exchange. For orders placed after the close of regular trading on the Exchange, or on a day on which the Exchange is not open for trading, the offering price is based upon NAV at the close of the Exchange on the next day thereafter on which the Exchange is open for trading. The NAV of a share of a Fund on which offering and redemption prices are based is the NAV of the Fund, divided by the number of shares outstanding, with the result adjusted to the nearer cent. The
NAV of the Funds is determined by subtracting the liabilities of the Funds from the value of its assets (chiefly composed of investment securities). The NAV per share for a class is calculated by adding the value of all securities and other assets of a Fund allocable to the class, deducting liabilities allocable to that class, and dividing by the number of that class' shares outstanding.
Securities for which market quotations are readily available are values at current market value as of Valuation Time. Valuation Time will be as of the close of regular trading on the New York Stock Exchange (usually 4 P.M. Eastern Time). Equity securities are valued at the last quoted sale price, or if there is no sale price, the last quoted bid price provided by an independent pricing service approved by the Board of Trustees. Securities traded on NASDAQ are valued at the NASDAQ Official Closing Price. Prices are taken from the primary market or exchange in which each security trades.
Debt and other fixed-income securities (other than short-term obligations) are valued at the last quoted bid price and/or by using a combination of daily quotes and matrix evaluations provided by an independent pricing service, the use of which has been approved by the Board of Trustees of the Trust. Short-term debt securities such as commercial paper and U.S. treasury bills, having a remaining maturity of 60 days or less are considered to be "short-term" and are valued at amortized cost which approximates market value. The pricing service activities and results are reviewed by an officer of the Trust. Debt Securities of the Trust's Money Market Funds are valued at amortized cost, which approximates market value.
The pricing service activities and results are reviewed by an officer of the Trust. Securities for which market quotations are not readily available, or for which an independent pricing service does not provide a value or provides a value that does not represent fair value in the judgment of GMFCT or designee, are valued at fair value under procedures approved by the Funds' Board of Trustees. Fair value determinations are required for securities whose value is affected by a significant event that will materially affect the value of a domestic or foreign security and which occurs subsequent to the time of the close of the principal market on which such domestic or foreign security trades but prior to the calculation of the Funds' NAVs.
Each Fund values foreign equity securities at fair value in the circumstances described below. Generally, trading in foreign securities markets is completed each day at various times prior to the Valuation Time. Due to the time differences between the closings of the relevant foreign securities exchanges and the Valuation Time for the Funds, the Funds will fair value their foreign investments when the market quotations for the foreign investments either are not readily available or are unreliable and, therefore, do not represent fair value. When fair value prices are utilized, these prices will attempt to reflect the impact of the U.S. financial markets' perceptions and trading activities on the Funds' foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust have determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair valuation of portfolio securities may occur on a daily basis. The fair value pricing by the Trust utilizes data furnished by an independent pricing service (and that data draws upon, among other information, the market values of foreign investments). The fair value prices of portfolio securities generally will be used when it is determined that the use of such prices will have an impact on the net asset value of the Funds. When the Funds use fair value pricing, the values assigned to the Funds' foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
The Trust may suspend the right of redemption for such periods as are permitted under the 1940 Act and under the following unusual circumstances: (a) when the New York Stock Exchange is closed (other than weekends and holidays) or trading is restricted; (b) when an emergency exists, making disposal of portfolio securities or the valuation of net assets not reasonably practicable; or (c) during any period when the SEC has by order permitted a suspension of redemption for the protection of shareholders.
SYSTEMATIC INVESTMENT STRATEGIES
Automatic Asset Accumulation - This is a systematic investment strategy which combines automatic monthly transfers from your personal checking account to your mutual fund account with the concept of Dollar Cost Averaging. With this strategy, you invest a fixed amount monthly over an extended period of time, during both
market highs and lows. Dollar Cost Averaging can allow you to achieve a favorable average share cost over time since your fixed monthly investment buys more shares when share prices fall during low markets, and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past. Once you have opened an account with at least $1,000, you can contribute to an Automatic Asset Accumulation plan for as little as $50 a month in the Funds.
Automatic Asset Transfer - This systematic investment plan allows you to transfer $25 or more to one Fund from another Fund systematically, monthly or quarterly, after Fund minimums have been met. The money is transferred on the 25th day of the month as selected or on the preceding business day. Dividends of any amount can be moved automatically from one Fund to another at the time they are paid. This strategy can provide investors with the benefits of Dollar Cost Averaging through an opportunity to achieve a favorable average share cost over time. With this plan, your fixed monthly or quarterly transfer from the Fund to any other Fund you select buys more shares when share prices fall during low markets and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past. For transfers from the Prime Shares of the Gartmore Money Market Fund to either Fund, sales charges may apply if not already paid.
Automatic Withdrawal Plan ($50 or More) - You may have checks for any fixed amount of $50 or more automatically sent bi-monthly, monthly, quarterly, semi-annually or annually, to you (or anyone you designate) from your account for Class A, Class B, and Class C shares. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Transfer Agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce and eventually deplete your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge. The $50 minimum is waived for required minimum distributions from individual retirement accounts.
NOTE: If you are withdrawing more shares than your account receives in dividends, you will be decreasing your total shares owned, which will reduce your future dividend potential.
Automatic Withdrawal Plan (AWP) on Class B Shares - You will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year.
For each AWP payment, assets that are not subject to a CDSC, such as appreciation on shares and shares acquired through reinvestment of dividends and/or capital gains distributions, will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC to cover a particular AWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any dividends and/or capital gains distributions taken in cash by a shareholder who receives payments through AWP will also count toward the 12% limit. In the case of AWP, the 12% limit is calculated at the time of an automatic redemption is first made, and is recalculated at the time each additional automatic redemption is made.
INVESTOR PRIVILEGES
The Fund offers the following privileges to shareholders. Additional information may be obtained by calling GDSI toll free at 800-848-0920.
No Sales Charge on Reinvestments - All dividends and capital gains will be automatically reinvested free of charge in the form of additional shares within the same Fund and class or another specifically requested Fund (but the same class) unless you have chosen to receive them in cash on your application. Unless requested in writing by the shareholder, the Trust will not mail checks for dividends and capital gains of less than $5 but instead they will be automatically reinvested in the form of additional shares.
Exchange Privilege - The exchange privilege is a convenient way to exchange shares from one Gartmore Fund to another Gartmore Fund in order to respond to changes in your goals or in market conditions. The registration of the account to which you are making an exchange must be exactly the same as that of the fund account from which the exchange is made, and the amount you exchange must meet the applicable minimum
investment of the fund being purchased. The exchange privilege may be limited due to excessive trading or market timing of fund shares.
Exchanges among Funds
Exchanges may be made among any of the Gartmore Funds within the same class of shares (except for any other Fund not currently accepting purchase orders or Class X or Class Y shares of the Fixed Income Funds), as long as both accounts have the same owner, and your first purchase in a new fund meets the new fund's minimum investment requirement (and subject to the investor eligibility requirements for the Gartmore Short Duration Bond Fund).
Because Class R shares of the Funds are held within retirement plans, exchange privileges with other Class R shares of the Gartmore Funds may not be available unless the Class R shares of the other Gartmore Funds are also available within a plan. Please contact your retirement plan administrator for information on how to exchange your Class R shares within your retirement plan.
Generally, there is no sales charge for exchanges of Class B, Class C, Class R, Institutional Service Class or Institutional Class shares. However, if your exchange involves certain Class A shares, you may have to pay the difference between the sales charges if a higher sales charge applies to the Fund into which you are exchanging. If you exchange your Class A shares that are subject to a CDSC into another Gartmore Fund and then redeem those Class A shares within 18 months of the original purchase (24 months for Gartmore Enhanced Income Fund and Gartmore Short Duration Bond Fund), the applicable CDSC will be the CDSC for the Fund. Exchanges into the Prime Shares of the Money Market Fund are only permitted from Class A, Class B, Class C and Institutional Service Class shares of the Fund. If you exchange Class B or Class C shares (or certain Class A shares subject to a CDSC) for Prime Shares of the Money Market Fund, the time you hold the shares in the Money Market Fund will not be counted for purposes of calculating any CDSC. As a result, if you then sell your Prime Shares of the Money Market Fund, you will pay the sales charge that would have been charged if the initial Class B, Class C (or certain Class A) shares had been sold at the time they were originally exchanged into the Money Market Fund. If you exchange your Prime Shares of the Money Market Fund back into Class B, Class C (or certain Class A) shares, the time you held Class B, Class C (or certain Class A) shares prior to the initial exchange into the Money Market Fund will be counted for purposes or calculating the CDSC. If you wish to purchase shares of a Fund or class for which the exchange privilege does not apply, you will pay any applicable CDSC at the time you redeem your shares and pay any applicable front-end load on a new Fund you are purchasing unless a sales charge waiver otherwise applies.
Exchanges May Be Made Four Convenient Ways:
By Telephone
Automated Voice Response System - You can automatically process exchanges by calling 800-848-0920, 24 hours a day, seven days a week. However, if you declined the option on the application, you will not have this automatic exchange privilege. This system also gives you quick, easy access to mutual fund information. Select from a menu of choices to conduct transactions and hear the Fund price information, mailing and wiring instructions as well as other mutual fund information. You must call our toll free number by the Valuation Time to receive that day's closing share price. The Valuation Time is the close of regular trading of the New York Stock Exchange, which is usually 4:00 p.m. Eastern Time.
Customer Service Line - By calling 800-848-0920, you may exchange shares by telephone. Requests may be made only by the account owner(s). You must call our toll free number by the Valuation Time to receive that day's closing share price.
The Funds may record all instructions to exchange shares. The Funds reserve the right at any time without prior notice to suspend, limit or terminate the telephone exchange privilege or its use in any manner by any person or class.
The Funds will employ the same procedure described under "Buying, Selling and Exchanging Fund Shares" in the Prospectus to confirm that the instructions are genuine.
The Funds will not be liable for any loss, injury, damage, or expense as a result of acting upon instructions communicated by telephone reasonably believed to be genuine, and the Funds will be held harmless from any loss, claims or liability arising from its compliance with such instructions. These options are subject to the terms and conditions set forth in the Prospectus and all telephone transaction calls may be recorded. The Funds reserve the right to revoke this privilege at any time without notice to shareholders and request the redemption in writing, signed by all shareholders.
By Mail or Fax - Write to Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205 or fax (614) 428-3278. Please be sure that your letter or facsimile is signed exactly as your account is registered and that your account number and the Fund from which you wish to make the exchange are included. For example, if your account is registered "John Doe and Mary Doe", "Joint Tenants With Right of Survivorship,' then both John and Mary must sign the exchange request. The exchange will be processed effective the date the signed letter or fax is received. Fax requests received after the Valuation Time will be processed as of the next business day. The Fund reserves the right to require the original document if you use the fax method.
By On-Line Access - Log on to our website www.nwdfunds.com 24 hours a day, seven days a week, for easy access to your mutual fund accounts. Once you have reached the website, you will be instructed on how to select a password and perform transactions. You can choose to receive information on all Gartmore Funds as well as your own personal accounts. You may also perform transactions, such as purchases, redemptions and exchanges. The Funds may terminate the ability to buy Fund shares on their website at any time, in which case you may continue to exchange shares by mail, wire or telephone pursuant to the Prospectus.
INVESTOR SERVICES
Automated Voice Response System - Our toll free number 800-848-0920 will connect you 24 hours a day, seven days a week to the system. Through a selection of menu options, you can conduct transactions, hear fund price information, mailing and wiring instructions and other mutual fund information.
Toll Free Information and Assistance - Customer service representatives are available to answer questions regarding the Funds and your account(s) between the hours of 8 a.m. and 9 p.m. Eastern Time (Monday through Friday). Call toll free: 800-848-0920 or contact us at our fax number 614- 428-3278.
Retirement Plans- Shares of the Funds may be purchased for Self-Employed Retirement Plans, Individual Retirement Accounts (IRAs), Roth IRAs, Coverdell Education Savings Accounts, Simplified Employee Pension Plans, Corporate Pension Plans, Profit Sharing Plans and Money Purchase Plans. For a free information kit, call 800-848-0920.
Shareholder Confirmations - You will receive a confirmation statement each time a requested transaction is processed. However, no confirmations are mailed on certain pre-authorized, systematic transactions, or IRAs. Instead, these will appear on your next consolidated statement.
Consolidated Statements - Shareholders of the Funds receive quarterly statements as of the end of March, June, September and December. Please review your statement carefully and notify us immediately if there is a discrepancy or error in your account.
For shareholders with multiple accounts, your consolidated statement will reflect all your current holdings in the Gartmore Funds. Your accounts are consolidated by Social Security number and zip code. Accounts in your household under other Social Security numbers may be added to your statement at your request. Depending on which Funds you own, your consolidated statement will be sent either monthly or quarterly. Only transactions during the reporting period will be reflected on the statements. An annual summary statement reflecting all calendar-year transactions in all your funds will be sent after year-end.
Average Cost Statement - This statement may aid you in preparing your tax return and in reporting capital gains and losses to the IRS. If you redeemed any shares during the calendar year, a statement reflecting your taxable gain or loss for the calendar year (based on the average cost you paid for the redeemed shares) will be mailed to you following each year-end. Average cost can only be calculated on accounts opened on or after January 1, 1984. Fiduciary accounts and accounts with shares acquired by gift, inheritance, transfer, or by any means other than a purchase cannot be calculated.
Average cost is one of the IRS approved methods available to compute gains or losses. You may wish to consult a tax adviser on the other methods available. The average cost information will not be provided to the IRS. If you have any questions, contact one of our service representatives at 800-848-0920.
Shareholder Reports - All shareholders will receive reports semi-annually detailing the financial operations of the Funds.
Prospectuses - An updated prospectus will be mailed to you at least annually.
Undeliverable Mail - If mail from a Fund to a shareholder is returned as undeliverable on two or more consecutive occasions, the Fund will not send any future mail to the shareholder unless it receives notification of a correct mailing address for the shareholder. With respect to any redemption checks or dividend/capital gains distribution checks that are returned as undeliverable or not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and any future distributions in shares of the Fund at the then-current net asset value of the Fund until the Fund receives further instructions from the shareholder.
PERFORMANCE ADVERTISING
The Funds may use past performance in advertisements, sales literature, and their Prospectus, including calculations of average annual total return as described below.
Total Return
The Funds may from time to time advertise historical performance, subject to Rule 482 under the Securities Act, or Rule 34b-1 under the 1940 Act. An investor should keep in mind that any return or yield quoted represents past performance and is not a guarantee of future results. The investment return and principal value of investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
All performance advertisements shall include average annual total return quotations for the most recent one-, five-, and ten-year periods (or life, if the Funds have been in operation less than one of the prescribed periods). Average annual total return represents the rate required each year for an initial investment to equal the redeemable value at the end of the quoted period. It is calculated in a uniform manner by dividing the ending redeemable value of a hypothetical initial payment of $1,000 for a specified period of time, by the amount of the initial payment, assuming reinvestment of all dividends and distributions. The one-, five-, and ten-year periods are calculated based on periods that end on the last day of the calendar quarter preceding the date on which an advertisement is submitted for publication.
ADDITIONAL INFORMATION
Description Of Shares
The Amended Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest of a Fund and to divide or combine such shares into a greater or lesser number of shares without thereby exchanging the proportionate beneficial interests in the Trust. Each share of a Fund represents an equal proportionate interest in a Fund with each other share. The Trust reserves the right to create and issue a number of different funds. Shares of the Fund would participate equally in the earnings, dividends, and assets of those particular funds. Upon liquidation of the Fund, shareholders are entitled to share pro rata in the net assets of the Fund available for distribution to shareholders.
The Trust is currently authorized to offer shares of beneficial interest, without par value, in 49 series. With respect to the Funds, the Trust is authorized to offer the following share classes: Class A, Class B, Class C, Class R, Institutional Service Class, and Institutional Class.
You have an interest only in the assets of the shares of a Fund which you own. Shares of a particular class are equal in all respects to the other shares of that class. In the event of liquidation of a Fund, shares of the same class will share pro rata in the distribution of the net assets of the Fund with all other shares of that class. All shares are without par value and when issued and paid for, are fully paid and nonassessable by the Trust. Shares may be exchanged or converted as described in this SAI and in the Prospectus but will have no other preference, conversion, exchange or preemptive rights.
Voting Rights
Shareholders of each class of shares have one vote for each share held and a proportionate fractional vote for any fractional share held. An annual or special meeting of shareholders to conduct necessary business is not required by the Declaration of Trust, the 1940 Act or other authority except, under certain circumstances, to amend the Declaration of Trust, the Investment Advisory Agreement, fundamental investment objectives, investment policies and investment restrictions, to elect and remove Trustees, to reorganize the Trust or any series or class thereof and to act upon certain other business matters. In regard to termination, sale of assets, the change of investment objectives, policies and restrictions or the approval of an Investment Advisory Agreement, the right to vote is limited to the holders of shares of the particular fund affected by the proposal. In addition, holders of shares subject to a Rule 12b-1 fee will vote as a class and not with holders of any other class with respect to the approval of the Distribution Plan.
To the extent that such a meeting is not required, the Trust does not intend to have an annual or special meeting of shareholders. The Trust has represented to the SEC that the Trustees will call a special meeting of shareholders for purposes of considering the removal of one or more Trustees upon written request therefor from shareholders holding not less than 10% of the outstanding votes of the Trust and the Trust will assist in communicating with other shareholders as required by Section 16(c) of the 1940 Act. At such meeting, a quorum of shareholders (constituting a majority of votes attributable to all outstanding shares of the Trust), by majority vote, has the power to remove one or more Trustees.
Shareholder Inquiries
All inquiries regarding the Trust should be directed to the Trust at the telephone number or address shown on the cover page of this SAI.
ADDITIONAL GENERAL TAX INFORMATION
Buying a dividend
If you invest in a Fund shortly before the record date of a taxable distribution, the distribution will lower the value of the Fund's shares by the amount of the distribution, and you will in effect receive some of your investment back, but in the form of a taxable distribution.
Multi-class funds
Each Fund calculates dividends and capital gain distributions in the same manner for each class. The amount of any dividends per share will differ, however, generally due to the difference in the distribution and service (Rule 12b-1) and administrative services fees applicable to each class.
Distributions of net investment income
Each Fund receives income generally in the form of dividends and interest on its investments. This income, less expenses incurred in the operation of a Fund, constitutes the Fund's net investment income from which income dividends may be paid to you. If you are a taxable investor, any distributions by a Fund from such income (other than qualified dividend income received by individuals) will be taxable to you at ordinary income tax rates, whether
you receive them in cash or in additional shares. Distributions from qualified dividend income will be taxable to individuals at long-term capital gain rates, provided certain holding period requirements are met. See the discussion below under the heading, "Qualified Dividend Income for Individuals."
Distributions of capital gain
Each Fund may realize a capital gain or loss in connection with sales or other dispositions of its portfolio securities. Distributions from net short-term capital gain will be taxable to you as ordinary income. Distributions paid from the excess of net long-term capital gain over net short-term capital loss will be taxable to you as long-term capital gain, regardless of how long you have held your shares in a Fund. Any net short-term or long-term capital gain realized by a Fund (net of any capital loss carryovers) generally will be distributed once each year and may be distributed more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund.
Returns of Capital
If a Fund's distributions exceed its taxable income and capital gains realized during a taxable year, all or a portion of the distributions made in the same taxable year may be recharacterized as a return of capital to shareholders. A return of capital distribution will generally not be taxable, but will reduce each shareholder's cost basis in a Fund and result in a higher reported capital gain or lower reported capital loss when those shares on which the distribution was received are sold. Any return of capital in excess of your basis, however, is taxable as a capital gain.
Investments in foreign securities
Effect of Foreign Withholding Taxes. A Fund may be subject to foreign withholding taxes on income from certain foreign securities. This, in turn, could reduce the Fund's distributions paid to you.
Effect of foreign debt investments on distributions. Most foreign exchange gains realized on the sale of debt securities are treated as ordinary income by a Fund. Similarly, foreign exchange losses realized on the sale of debt securities generally are treated as ordinary losses. These gains when distributed are taxable to you as ordinary income, and any losses reduce a Fund's ordinary income otherwise available for distribution to you. This treatment could increase or decrease a Fund's ordinary income distributions to you, and may cause some or all of the Fund's previously distributed income to be classified as a return of capital.
PFIC securities. A Fund may invest in securities of foreign entities that could be deemed for tax purposes to be passive foreign investment companies (PFICs). When investing in PFIC securities, each Fund intends to mark-to-market these securities and recognizes any gains at the end of its fiscal and excise (described below) tax years. Deductions for losses are allowable only to the extent of any current or previously recognized gains. These gains (reduced by allowable losses) are treated as ordinary income that a Fund is required to distribute, even though it has not sold the securities. You should also be aware that the designation of a foreign security as a PFIC security would cause its income dividends to fall outside of the definition of qualified foreign corporation dividends. These dividends will not qualify for the reduced rate of taxation on qualified dividends for individuals when distributed to you by a Fund. If a Fund is unable to identify an investment as a PFIC and thus does not make a mark-to-market election, the Fund may be subject to U.S. federal income tax on a portion of any "excess distribution" or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature of interest may be imposed on the Fund in respect of deferred taxes arising from such distributions or gains.
Information on the amount and tax character of distributions
The Funds will inform you of the amount of your ordinary income and capital gain dividends at the time they are paid, and will advise you of their tax status for federal income tax purposes shortly after the end of each calendar
year. If you have not held Fund shares for a full year, a Fund may designate and distribute to you, as ordinary income, qualified dividends or capital gains, and in the case of non-U.S. shareholders, a Fund may further designate and distribute as interest-related dividends and short-term capital gain dividends, a percentage of income that may not be equal to the actual amount of this type of income earned during the period of your investment in the Fund. Taxable distributions declared by a Fund in December but paid in January are taxable to you as if they were paid in December.
Election to be taxed as a regulated investment company
Each Fund intends to elect or has elected to be treated as a regulated investment company under Subchapter M of the Code. As a regulated investment company, a Fund generally pays no federal income tax on the income and gain it distributes to you. The Trust's Board of Trustees reserves the right not to maintain the qualification of each Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders. In such a case, the Fund would be subject to federal, and possibly state, corporate taxes on its taxable income and gain, and distributions to you would be taxed as dividend income to the extent of the Fund's earnings and profits.
In order to qualify as a regulated investment company for federal income tax purposes, each Fund must meet certain specific requirements, including:
(i) the Fund must maintain a diversified Fund of securities, wherein no security, including the securities of a qualified publicly traded partnership (other than U.S. government securities and securities of other regulated investment companies) can exceed 25% of the Fund's total assets, and, with respect to 50% of the Fund's total assets, no investment (other than cash and cash items, U.S. government securities and securities of other regulated investment companies) can exceed 5% of the Fund's total assets or 10% of the outstanding voting securities of the issuer;
(ii) the Fund must derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities, or currencies, and net income derived from an interest in a qualified publicly traded partnership; and
(iii) the Fund must distribute to its shareholders at least 90% of its investment company taxable income and net tax-exempt income for each of its fiscal years.
Excise tax distribution requirements
To avoid federal excise taxes, the Code requires each Fund to distribute to you by December 31 of each year, at a minimum, the following amounts: 98% of its taxable ordinary income earned during the calendar year; 98% of its capital gain net income earned during the twelve-month period ending October 31; and 100% of any undistributed amounts from the prior year. Each Fund intends to declare and pay these distributions in December (or to pay them in January, in which case you must treat them as received in December) but can give no assurances that its distributions will be sufficient to eliminate all taxes.
Sales of Fund shares
Sales and exchanges of Fund shares are taxable transactions for federal and state income tax purposes. If you sell your Fund shares, whether you receive cash or exchange them for shares of a different Gartmore Fund, the IRS requires you to report any gain or loss on your sale or exchange. If you owned your shares as a capital asset, any gain or loss that you realize generally is a capital gain or loss, and is long-term or short-term, depending on how long you owned your shares. Any redemption/exchange fees you incur on shares redeemed or exchanged within 90 days after the date they were purchased will decrease the amount of any capital gain (or increase any capital loss) you realize on the sale or exchange.
Sales at a loss within six months of purchase. Any loss incurred on the sale or exchange of Fund shares owned for six months or less is treated as a long-term capital loss to the extent of any long-term capital gains distributed to you by the Fund on those shares.
Deferral of basis - Class A shares only. In reporting gain or loss on the sale of your Fund shares, you may be required to adjust your basis in the shares you sell under the following circumstances:
IF:
o In your original purchase of Fund shares, you received a reinvestment right (the right to reinvest your sales proceeds at a reduced or with no sales charge), and
o You sell some or all of your original shares within 90 days of their purchase, and
o You reinvest the sales proceeds in the Fund or in another Gartmore Fund, and the sales charge that would otherwise apply is reduced or eliminated;
THEN:
In reporting any gain or loss on your sale, all or a portion of the sales charge that you paid for your original shares is excluded from your tax basis in the shares sold and added to your tax basis in the new shares.
Wash sales. All or a portion of any loss that you realize on the sale of your Fund shares is disallowed to the extent that you buy other shares in the Fund within 30 days before or after your sale. Any loss disallowed under these rules is added to your tax basis in the new shares.
U.S. government securities
The income earned on certain U.S. government securities is exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on these securities, subject in some states to minimum investment or reporting requirements that must be met by a Fund. The income on Fund investments in certain securities, such as repurchase agreements, commercial paper and federal agency-backed obligations (e.g., Government National Mortgage Association (Ginnie Mae) or Federal National Mortgage Association (Fannie Mae) securities), generally does not qualify for tax-free treatment. The rules on exclusion of this income are different for corporations.
Qualified dividend income for individuals
For individual shareholders, a portion of the dividends paid by a Fund may be qualified dividends eligible for taxation at long-term capital gain rates. This reduced rate generally is available for dividends paid by a Fund out of dividends earned on the Fund's investment in stocks of domestic corporations and qualified foreign corporations. Dividends from PFICs are not eligible to be treated as qualified dividend income.
Both the Fund and the investor must meet certain holding period requirements to qualify Fund dividends for this treatment. Specifically, a Fund must hold the stock for at least 61 days during the 121-day period beginning 60 days before the stock becomes ex-dividend. Similarly, investors must hold their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund distribution goes ex-dividend. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of stock is not entitled to receive the dividend payment. When counting the number of days you held your Fund shares, include the day you sold your shares but not the day you acquired these shares.
While the income received in the form of a qualified dividend is taxed at the same rates as long-term capital gains, such income will not be considered as a long-term capital gain for other federal income tax purposes. For example, you will not be allowed to offset your long-term capital losses against qualified dividend income on your federal income tax return. Any qualified dividend income that you elect to be taxed at these reduced rates also cannot be used as investment income in determining your allowable investment interest expense. For other limitations on the amount of or use of qualified dividend income on your income tax return, please contact your personal tax advisor.
After the close of its fiscal year, a Fund will designate the portion of its ordinary dividend income that meets the definition of qualified dividend income taxable at reduced rates. If 95% or more of a Fund's income is from qualified sources, it will be allowed to designate 100% of its ordinary income distributions as qualified dividend income.
Dividends-Received Deduction for Corporations
The portion of dividends paid by a Fund that qualifies for the corporate dividends-received deduction will be designated each year in a notice mailed to the Fund's shareholders, and cannot exceed the gross amount of dividends received by the Fund from domestic (U.S.) corporations that would have qualified for the dividends-received deduction in the hands of the Fund if the Fund was a regular corporation.
The availability of the dividends-received deduction is subject to certain holding period and debt financing restrictions imposed under the Code on the corporation claiming the deduction. The amount that a Fund may designate as eligible for the dividends-received deduction will be reduced or eliminated if the shares on which the dividends earned by the Fund were debt-financed or held by the Fund for less than a minimum period of time, generally 46 days during a 91-day period beginning 45 days before the stock becomes ex-dividend. Similarly, if your Fund shares are debt-financed or held by you for less than a 46-day period then the dividends-received deduction for Fund dividends on your shares may also be reduced or eliminated. Even if designated as dividends eligible for the dividends-received deduction, all dividends (including any deducted portion) must be included in your alternative minimum taxable income calculation.
Investment in complex securities
Each Fund may invest in complex securities (e.g., futures, options, forward currency contracts, short-sales, PFICs, etc.) that may be subject to numerous special and complex tax rules. These rules could affect whether gain or loss recognized by a Fund is treated as ordinary or capital, or as interest or dividend income. These rules could also accelerate the recognition of income to a Fund (possibly causing the Fund to sell securities to raise the cash for necessary distributions). These rules could defer a Fund's ability to recognize a loss, and, in limited cases, subject the Fund to U.S. federal income tax on income from certain foreign securities. These rules could, therefore, affect the amount, timing, or character of the income distributed to you by a Fund.
Derivatives. Each Fund is permitted to invest in a options, futures contracts, options on futures contracts, stock index options and forward currency contracts to hedge a Fund's portfolio or for any other permissible purposes consistent with that Fund's investment objective. If a Fund makes these investments, it could be required to mark-to-market these contracts and realize any unrealized gains and losses at its fiscal year end even though it continues to hold the contracts. Under these rules, gains or losses on the contracts generally would be treated as 60% long-term and 40% short-term gains or losses, but gains or losses on certain foreign currency contracts would be treated as ordinary income or losses. In determining its net income for excise tax purposes, the Fund also would be required to mark-to-market these contracts annually as of October 31 (for capital gain net income and ordinary income arising from certain foreign currency contracts), and to realize and distribute any resulting income and gains.
Constructive Sales. A Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize gain, but not loss, on the position.
Tax Straddles. A Fund's investment in options, futures, forwards, or foreign currency contracts (or in substantially similar or related property) in connection with certain hedging transactions could cause it to hold offsetting positions in securities. If a Fund's risk of loss with respect to specific securities in its portfolio is substantially diminished by the fact that it holds other securities, the Fund could be deemed to have entered into a tax "straddle" or to hold a "successor position" that would require any loss realized by it to be deferred for tax purposes.
Short sales and securities lending transactions. A Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize
gain, but not loss, on the position. Additionally, a Fund's entry into securities lending transactions may cause the replacement income earned on the loaned securities to fall outside of the definition of qualified dividend income. This replacement income generally will not be eligible for reduced rates of taxation on qualified dividend income, and, to the extent that debt securities are loaned, will generally not qualify as qualified interest income for foreign withholding tax purposes.
Investment in REMIC residual interests (excess inclusion income). A Fund may invest in residual interests in certain mortgage pooling vehicles formed as real estate mortgage investment conduits ("REMICs"). The portion of the Fund's income received from REMIC residual interests, either directly or through an investment in a REIT that holds such interests or qualifies as a taxable mortgage pool (such income is referred to in the Code as "excess inclusion income") generally is required to be allocated by the Fund to its shareholders in proportion to the dividends paid to such shareholders with the same consequences as if the shareholders received the excess inclusion income directly.
Under these rules, a Fund will be taxed at the highest corporate income tax rate on its excess inclusion income that is allocable to the percentage of its shares held in record name by "disqualified organizations," which are generally certain cooperatives, governmental entities and tax-exempt organizations that are exempt from tax on unrelated business taxable income. To the extent that Fund shares owned by "disqualified organizations" are held in record name by a broker/dealer or other nominee, the broker/dealer or other nominee would be liable for the corporate level tax on the portion of the Fund's excess inclusion income allocable to Fund shares held by the broker/dealer or other nominee on behalf of the "disqualified organizations." The Fund expects that disqualified organizations own their shares. Because this tax is imposed at the Fund level, all shareholders, including shareholders that are not disqualified organizations, will bear a portion of the tax cost associated with the Fund's receipt of excess inclusion income. However, to the extent permissible under the 1940 Act, regulated investment companies such as the Fund are permitted under Treasury Regulations to specially allocate this tax expense to the disqualified organizations to which it is attributable, without a concern that such an allocation will constitute a preferential dividend.
Investments in securities of uncertain tax character. Each Fund may invest in securities the U.S. Federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by a Fund, it could affect the timing or character of income recognized by the Fund, requiring the Fund to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Code.
Backup Withholding.
By law, a Fund must withhold a portion of your taxable dividends and sales proceeds unless you:
o provide your correct social security or taxpayer identification number,
o certify that this number is correct,
o certify that you are not subject to backup withholding, and
o certify that you are a U.S. person (including a U.S. resident alien).
A Fund also must withhold if the IRS instructs it to do so. When withholding is required, the amount will be 28% of any dividends or proceeds paid. The special U.S. tax certification requirements applicable to non-U.S. investors are described under the "Non-U.S. Investors" heading below.
Non-U.S. Investors.
Non-U.S. Investors may be subject to U.S. withholding and estate tax and are subject to special U.S. tax certification requirements. Foreign persons should consult their tax advisors about the applicability of U.S. tax withholding and the use of the appropriate forms to certify their status.
In general. The United States imposes a flat 30% withholding tax (or lower treaty rate) on U.S. source dividends.
Capital Gain Dividends & Short-Term Capital Gain Dividends. In general, capital gain dividends paid by the Fund from either long-term or short-term capital gains (other than gain realized on disposition of U.S. real property interests) are not subject to U.S. withholding tax unless you are a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year.
Interest-Related Dividends. Interest-related dividends paid by a Fund from
qualified interest income are not subject to U.S. withholding tax. "Qualified
interest income" includes, in general, U.S. source (1) bank deposit interest,
(2) short-term original discount and (3) interest (including original issue
discount, market discount, or acquisition discount) on an obligation which is in
registered form, unless it is earned on an obligation issued by a corporation or
partnership in which the Fund is a 10-percent shareholder or is contingent
interest, and (4) any interest-related dividend from another regulated
investment company. While each Fund makes every effort to disclose any amounts
of interest-related dividends distributed to its non-U.S. shareholders,
intermediaries who have assumed tax reporting responsibilities on these
distributions may not have fully developed systems that will allow these tax
withholding benefits to be passed through to them.
Sunset Date for Short-Term Capital Gain Dividends and Interest-Related Dividends. The exemption from withholding for short-term capital gain dividends and interest-related dividends paid by a Fund is effective for dividends paid with respect to taxable years of the Fund beginning after December 31, 2004 and before January 1, 2008, unless such exemption is extended or made permanent.
Other. Ordinary dividends paid by a Fund to non-U.S. investors on the income earned on portfolio investments in (i) the stock of domestic and foreign corporations, and (ii) the debt of foreign issuers continue to be subject to U.S. withholding tax. If you hold your Fund shares in connection with a U.S. trade or business, your income and gains will be considered effectively connected income and taxed in the U.S. on a net basis, in which case you may be required to file a nonresident U.S. income tax return.
U.S. Estate Tax. A partial exemption from U.S estate tax may apply to stock in a Fund held by the estate of a nonresident decedent. The amount treated as exempt is based upon the proportion of the assets held by a Fund at the end of the quarter immediately preceding the decedent's death that are debt obligations, deposits, or other property that would generally be treated as situated outside the United States if held directly by the estate. This provision applies to decedents dying after December 31, 2004 and before January 1, 2008, unless such provision is extended or made permanent.
U.S Tax Certification Rules. Special U.S. tax certification requirements apply to non-U.S. shareholders both to avoid U.S. back up withholding imposed at a rate of 28% and to obtain the benefits of any treaty between the United States and the shareholder's country of residence. In general, a non-U.S. shareholder must provide a Form W-8 BEN (or other applicable Form W-8) to establish that you are not a U.S. person, to claim that you are the beneficial owner of the income and, if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a country with which the United States has an income tax treaty. A Form W-8BEN provided without a U.S. taxpayer identification number will remain in effect for a period beginning on the date signed and ending on the last day of the third succeeding calendar year unless an earlier change of circumstances makes the information on the form incorrect.
This discussion of "Additional General Tax Information" is not intended or written to be used as tax advice and does not purport to deal with all federal tax consequences applicable to all categories of investors, some of which may be subject to special rules. You should consult your own tax advisor regarding your particular circumstances before making an investment in either of the Funds.
MAJOR SHAREHOLDERS
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, each located at One Nationwide Plaza, Columbus, Ohio 43215 and Nationwide Life Insurance Company of America ("NLICA"), located at 1000 Chesterbrook Boulevard, Berwyn, Pennsylvania 19312, are wholly-owned by Nationwide Financial Services, Inc. ("NFS"). Nationwide Life and Annuity Insurance Company of America, located at 300 Continental Drive, Newark, Delaware 19713, is wholly-owned by NLICA. NFS, a holding company, has two classes of common stock outstanding with different voting rights enabling Nationwide Corporation (the holder of all outstanding Class B Common Stock) to control NFS. Nationwide Corporation is also a holding company in the Nationwide Insurance Enterprise. All of the common stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders.
As of October 31, 2006, the Trustees and Officers of the Trust as a group owned beneficially less than 1% of the shares of the Trust, and less than 1% of any class of shares of a Fund.
As of February 2, 2007, the following shareholders held five percent or greater of the shares of a class of a Fund:
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Number of Shares
Beneficially Percent of the Class
Name and Address of Shareholder Owned Held by the Shareholder
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND CLASS A
--------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH 164.684 61.89%
OMNIBUS ACCOUNTS FOR NON OMNIBUS USE 640
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE FL 32246
--------------------------------------------------------------------------------------------------------------------
NWD INVESTMENTS 101.417 38.11%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND CLASS B
--------------------------------------------------------------------------------------------------------------------
NWD INVESTMENTS SEED ACCOUNT 101.419 100.00%
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND CLASS C
--------------------------------------------------------------------------------------------------------------------
NWD INVESTMENTS SEED ACCOUNT 101.419 100.00%
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND INSTUTIONAL CLASS
--------------------------------------------------------------------------------------------------------------------
NWD INVESTMENTS 507304.189 98.15%
SEED ACCOUNT
ATTN MIKE POLICARPO
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND CLASS R
--------------------------------------------------------------------------------------------------------------------
NWD INVESTMENTS 101.418 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP GROWTH OPPORTUNITIES FUND INSTUTIONAL
SERVICE CLASS
--------------------------------------------------------------------------------------------------------------------
NWD INVESTMENTS 101.461 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP VALUE FUND CLASS A
--------------------------------------------------------------------------------------------------------------------
PERSHING LLC 12710.827 78.03%
1 PERSHING PLAZA
14TH FLOOR
JERSEY CITY NJ 07399
--------------------------------------------------------------------------------------------------------------------
LINDA A FLYNN 2932.961 18.00%
IRA
428 COLONY PARK DR
PICKERINGTON, OH 43147
--------------------------------------------------------------------------------------------------------------------
GARTMORE SMALL CAP VALUE FUND CLASS B
--------------------------------------------------------------------------------------------------------------------
NWD INVESTMENTS 103.725 100.00%
SEED ACCOUNT
ATTN DANIEL BRZEZINSKI
1200 RIVER RD SUITE 1000
CONSHOHOCKEN PA 19428-2436
--------------------------------------------------------------------------------------------------------------------
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-------------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP VALUE FUND CLASS C -------------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 103.725 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 -------------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP VALUE FUND INSTITUTIONAL CLASS -------------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 519898.328 98.14% SEED ACCOUNT ATTN MIKE POLICARPO 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 -------------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP VALUE FUND CLASS R -------------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 103.81 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 -------------------------------------------------------------------------------------------------------------------- GARTMORE SMALL CAP VALUE FUND INSTITUTIONAL SERVICE CLASS -------------------------------------------------------------------------------------------------------------------- NWD INVESTMENTS 103.98 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 -------------------------------------------------------------------------------------------------------------------- |
FINANCIAL STATEMENTS
The Report of Independent Registered Public Accounting Firm and Financial Statements for the Trust for the fiscal year ended October 31, 2006 in the Trust's Annual Report are incorporated herein by reference. Copies of the Trust's Annual Reports and Semi-Annual Reports are available without charge upon request by writing the Trust or by calling toll free 800-848-0920.
APPENDIX A
DEBT RATINGS
STANDARD & POOR'S DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB- Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
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SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. 'BB' indicates the least degree of speculation and 'C' the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB - Debt rated 'BB' is less vulnerable to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal
payments.
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B - Debt rated 'B' has a greater vulnerability to default than
obligations rated BB but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
CCC - Debt rated 'CCC' is currently vulnerable to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest
and repay principal.
CC - Debt rated 'CC' typically is currently highly vulnerable to
nonpayment.
C - Debt rated 'C' signifies that a bankruptcy petition has been filed,
but debt service payments are continued.
D - Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are
jeopardized.
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection
of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
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Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
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STATE AND MUNICIPAL NOTES
Excerpts from Moody's description of state and municipal note ratings:
MIG-1-- Notes bearing this designation are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing from established and board-based access to the market for
refinancing, or both.
MIG-2-- Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
MIG-3-- Notes bearing this designation are of favorable quality, with all
security elements accounted for but lacking the strength of the
preceding grade. Market access for refinancing, in particular, is
likely to be less well established.
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FITCH, INC. BOND RATINGS
Fitch, Inc. ("Fitch") investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered investment grade and representing the lowest
expectation of credit risk. The obligor has an exceptionally strong
capacity for timely payment of financial commitments, a capacity
that is highly unlikely to be adversely affected by foreseeable
events.
AA Bonds considered investment grade and of very high credit quality.
This rating indicates a very strong capacity for timely payment of
financial commitments, a capacity that is not significantly
vulnerable to foreseeable events.
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A Bonds considered investment grade and representing a low
expectation of credit risk. This rating indicates a strong
capacity for timely payment of financial commitments. This
capacity may, nevertheless, be more vulnerable to changes in
economic conditions or circumstances than long term debt with
higher ratings.
BBB Bonds considered to be in the lowest investment grade and
indicating that there is currently low expectation of credit
risk. The capacity for timely payment of financial commitments
is considered adequate, but adverse changes in economic
conditions and circumstances are more likely to impair this
capacity.
BB Bonds considered speculative. This rating indicates that there
is a possibility of credit risk developing, particularly as the
result of adverse economic changes over time; however, business
or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not
investment grade.
B Bonds considered highly speculative. This rating indicates that
significant credit risk is present, but a limited margin of
safety remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.
CCC, CC and C Bonds are considered a high default risk. Default is a real
possibility. Capacity for meeting financial commitments is
solely reliant upon sustained, favorable business or economic
developments. A 'CC' rating indicates that default of some kind
appears probable. 'C' rating signals imminent default.
DDD, DD and D Bonds are in default. Such bonds are not meeting current
obligations and are extremely speculative. 'DDD' designates the
highest potential for recovery of amounts outstanding on any
securities involved and 'D' represents the lowest potential for
recovery.
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SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from 'A-1' for the highest quality obligations to 'D' for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated 'A-1'.
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Issues rated 'B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.
D Debt rated 'D' is in payment default. the 'D' rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period.
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STANDARD & POOR'S NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating.
The following criteria will be used in making the assessment:
1. Amortization schedule - the larger the final maturity relative to other maturities, the more likely the issue is to be treated as a note.
2. Source of payment - the more the issue depends on the market for its refinancing, the more likely it is to be considered a note.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong capacity to pay principal and interest are given
a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
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MOODY'S SHORT-TERM RATINGS
Moody's short-term debt ratings are opinions on the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior capacity for repayment of senior short-term debt obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: (I) leading market positions in well established industries, (II) high rates of return on funds employed, (III) conservative capitalization structures with moderate reliance on debt and ample asset protection, (IV) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (V) well established access to a range of financial markets and assured sources of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the prime rating categories.
MOODY'S NOTE RATINGS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
SG This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
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FITCH'S SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+ Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
APPENDIX B
PROXY VOTING GUIDELINES SUMMARIES
GARTMORE MUTUAL FUNDS CAPITAL TRUST
GENERAL
The Board of Trustees of the Funds has confirmed the continued delegation of the authority to vote proxies relating to the securities held in the portfolios of the Funds to the Fund's investment adviser or sub-adviser, as the case may be, after each such Board reviewed and considered the proxy voting policies and procedures used by each of the investment advisers and sub-advisers of the Funds, some of which advisers and sub-advisers use an independent service provider, as described below.
Gartmore Mutual Fund Capital Trust. ( "GMFCT") is an investment adviser that is registered with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act"). GMFCT provides investment advisory services to various types of clients, including registered and unregistered investment companies, collective trusts, institutional separate accounts, wrap accounts, insurance general accounts, charitable endowments, Taft-Hartley Act plans, ERISA plans, state-sponsored funds, managed separate accounts, and individuals (hereinafter referred to collectively as the "Clients").
Voting proxies that are received in connection with underlying portfolio securities held by Clients is an important element of the portfolio management services that GMFCT performs for Clients. GMFCT's goal in performing this service is to make proxy voting decisions: (i) to vote or not to vote proxies in a manner that serves the best economic interests of advisory clients; and (ii) that avoid the influence of conflicts of interest. To implement this goal, GMFCT has adopted proxy voting guidelines (the "GMFCT Proxy Voting Guidelines") to assist GMFCT in making proxy voting decisions and in developing procedures for effecting those decisions. The GMFCT Proxy Voting Guidelines are designed to ensure that where GMFCT has the authority to vote proxies, all legal, fiduciary, and contractual obligations will be met.
The GMFCT Proxy Voting Policies address a wide variety of individual topics, including, among other matters, shareholder voting rights, anti-takeover defenses, board structures and the election of directors, executive and director compensation, reorganizations, mergers, and various shareholder proposals. The proxy voting records of the Funds are available to shareholders on the SEC's website.
HOW PROXIES ARE VOTED
GMFCT has delegated to Institutional Shareholder Services ("ISS"), an independent service provider, the administration of proxy voting for Client portfolio securities directly managed by GMFCT. ISS, a Delaware corporation, provides proxy-voting services to many asset managers on a global basis. A committee of GMFCT personnel has reviewed, and will continue to review annually, GMFCT's relationship with ISS and the quality and effectiveness of the various services provided by ISS.
Specifically, ISS assists GMFCT in the proxy voting and corporate governance oversight process by developing and updating the "ISS Proxy Voting Guidelines," which are incorporated into the GMFCT Proxy Voting Guidelines, and by providing research and analysis, recommendations regarding votes, operational implementation, and recordkeeping and reporting services. GMFCT's decision to retain ISS is based principally on the view that the services that ISS provides, subject to oversight by GMFCT, generally will result in proxy voting decisions which serve the best economic interests of Clients. GMFCT has reviewed, analyzed, and determined that the ISS Proxy Voting Guidelines are consistent with the views of GMFCT on the various types of proxy proposals. When the ISS Proxy Voting Guidelines do not cover a specific proxy issue and ISS does not provide a recommendation: (i) ISS will notify GMFCT; and (ii) GMFCT will use its best judgment in voting proxies on behalf of the Clients. A summary of the ISS Proxy Voting Guidelines is set forth below.
CONFLICTS OF INTEREST
GMFCT and its subsidiaries do not engage in investment banking, administration or management of corporate retirement plans, or any other activity that is likely to create a potential conflict of interest. In addition, because Client proxies are voted by ISS pursuant to the pre-determined ISS Proxy Voting Guidelines, GMFCT generally does not make an actual determination of how to vote a particular proxy, and, therefore, proxies voted on behalf of the Clients do not reflect any conflict of interest. Nevertheless, the GMFCT Proxy Voting Guidelines address the possibility of such a conflict of interest arising.
The GMFCT Proxy Voting Guidelines provide that, if a proxy proposal were to create a conflict of interest between the interests of a Client and those of GMFCT (or between a Client and those of any of GMFCT's affiliates, including Gartmore Distribution Services, Inc., and Nationwide), then the proxy should be voted strictly in conformity with the recommendation of ISS. To monitor compliance with this policy, any proposed or actual deviation from a recommendation of ISS must be reported to the chief counsel for GMFCT. The chief counsel for GMFCT then will provide guidance concerning the proposed deviation and whether a deviation presents any potential conflict of interest. If GMFCT then casts a proxy vote that deviates from an ISS recommendation, the affected Client (or other appropriate Client authority) will be given a report of this deviation.
CIRCUMSTANCES UNDER WHICH PROXIES WILL NOT BE VOTED
GMFCT, through ISS, shall attempt to process every vote for all domestic and foreign proxies that GMFCT receives; however, there may be cases in which GMFCT will not process a proxy because it is impractical or too expensive to do so. For example, GMFCT will not process a proxy in connection with a foreign security if the cost of voting a foreign proxy outweighs the benefit of voting the foreign proxy, when GMFCT has not been given enough time to process the vote, or when a sell order for the foreign security is outstanding and proxy voting would impede the sale of the foreign security. Also, GMFCT generally will not seek to recall the securities on loan for the purpose of voting the securities.
DELEGATION OF PROXY VOTING TO SUB-ADVISERS TO FUNDS
For any Fund, or portion of a Fund that is directly managed by a sub-adviser (other than GMFCT), the Trustees of the Fund and GMFCT have delegated proxy voting authority to that sub-adviser. Each sub-adviser has provided its proxy voting policies to the Board of Trustees of the Fund and GMFCT for their respective review and these proxy voting policies are described below. Each sub-adviser is required (1) to represent quarterly to GMFCT that all proxies of the Fund(s) advised by this sub-adviser were voted in accordance with the sub-adviser's proxy voting policies as provided to GMFCT and (2) to confirm that there have been no material changes to the sub-adviser's proxy voting policies.
INSTITUTIONAL SHAREHOLDER SERVICES ("ISS")
1. AUDITORS
Vote FOR proposals to ratify auditors, unless any of the following apply:
o An auditor has a financial interest in or association with the company, and is therefore not independent
o Fees for non-audit services are excessive, or
o There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position.
2. BOARD OF DIRECTORS
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes on director nominees should be made on a CASE-BY-CASE basis, examining the following factors: independence of the board and key board committees, attendance at board meetings, corporate governance
provisions and takeover activity, long-term company performance, responsiveness to shareholder proposals, any egregious board actions, and any excessive non-audit fees or other potential auditor conflicts.
CLASSIFICATION/DECLASSIFICATION OF THE BOARD
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors annually.
INDEPENDENT CHAIRMAN (SEPARATE CHAIRMAN/CEO)
Vote on a CASE-BY-CASE basis shareholder proposals requiring that the positions of chairman and CEO be held separately. Because some companies have governance structures in place that counterbalance a combined position, certain factors should be taken into account in determining whether the proposal warrants support. These factors include the presence of a lead director, board and committee independence, governance guidelines, company performance, and annual review by outside directors of CEO pay.
MAJORITY OF INDEPENDENT DIRECTORS/ESTABLISHMENT OF COMMITTEES VOTE FOR SHAREHOLDER PROPOSALS ASKING THAT A MAJORITY OR MORE OF DIRECTORS BE INDEPENDENT UNLESS THE BOARD COMPOSITION ALREADY MEETS THE PROPOSED THRESHOLD BY ISS'S DEFINITION OF INDEPENDENCE.
VOTE FOR SHAREHOLDER PROPOSALS ASKING THAT BOARD AUDIT, COMPENSATION, AND/OR NOMINATING COMMITTEES ARE COMPOSED EXCLUSIVELY OF INDEPENDENT DIRECTORS IF THEY CURRENTLY DO NOT MEET THAT STANDARD.
3. SHAREHOLDER RIGHTS
SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written consent.
Shareholder Ability to Call Special Meetings
Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.
SUPERMAJORITY VOTE REQUIREMENTS
Vote AGAINST proposals to require a supermajority shareholder vote.
VOTE FOR PROPOSALS TO LOWER SUPERMAJORITY VOTE REQUIREMENTS.
CUMULATIVE VOTING
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company's other governance provisions.
CONFIDENTIAL VOTING
Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents will not agree, the confidential voting policy is waived.
Vote FOR management proposals to adopt confidential voting.
4. PROXY CONTESTS
VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis, considering the factors that include the long-term financial performance, management's track record, qualifications of director nominees (both slates), and an evaluation of what each side is offering shareholders.
REIMBURSING PROXY SOLICITATION EXPENSES
Vote CASE-BY-CASE. Where ISS recommends in favor of the dissidents, we also recommend voting for reimbursing proxy solicitation expenses.
5. POISON PILLS
Vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals to redeem a company's poison pill and management proposals to ratify a poison pill.
6. MERGERS AND CORPORATE RESTRUCTURINGS
Vote CASE-BY-CASE on mergers and corporate restructurings based on such features as the fairness opinion, pricing, strategic rationale, and the negotiating process.
7. REINCORPORATION PROPOSALS
PROPOSALS TO CHANGE A COMPANY'S STATE OF INCORPORATION SHOULD BE EVALUATED ON A CASE-BY-CASE BASIS, GIVING CONSIDERATION TO BOTH FINANCIAL AND CORPORATE GOVERNANCE CONCERNS, INCLUDING THE REASONS FOR REINCORPORATING, A COMPARISON OF THE GOVERNANCE PROVISIONS, AND A COMPARISON OF THE JURISDICTIONAL LAWS. VOTE FOR REINCORPORATION WHEN THE ECONOMIC FACTORS OUTWEIGH ANY NEUTRAL OR NEGATIVE GOVERNANCE CHANGES.
8. CAPITAL STRUCTURE
COMMON STOCK AUTHORIZATION
Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis using a model developed by ISS.
Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain.
DUAL-CLASS STOCK
Vote AGAINST proposals to create a new class of common stock with superior voting rights.
Vote FOR proposals to create a new class of nonvoting or subvoting common stock if:
o It is intended for financing purposes with minimal or no dilution to current shareholders
o It is not designed to preserve the voting power of an insider or significant shareholder
9. EXECUTIVE AND DIRECTOR COMPENSATION
Votes with respect to compensation plans should be determined on a CASE-BY-CASE basis. Our methodology for reviewing compensation plans primarily focuses on the transfer of shareholder wealth (the dollar cost of pay plans to shareholders instead of simply focusing on voting power dilution). Using the expanded compensation data disclosed
under the SEC's rules, ISS will value every award type. ISS will include in its analyses an estimated dollar cost for the proposed plan and all continuing plans. This cost, dilution to shareholders' equity, will also be expressed as a percentage figure for the transfer of shareholder wealth, and will be considered long with dilution to voting power. Once ISS determines the estimated cost of the plan, we compare it to a company-specific dilution cap.
Vote AGAINST equity plans that explicitly permit repricing or where the company has a history of repricing without shareholder approval.
MANAGEMENT PROPOSALS SEEKING APPROVAL TO REPRICE OPTIONS
Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following:
o Historic trading patterns
o Rationale for the repricing
o Value-for-value exchange
o Option vesting
o Term of the option
o Exercise price
o Participation
EMPLOYEE STOCK PURCHASE PLANS
Votes on employee stock purchase plans should be determined on a CASE-BY-CASE basis. Vote FOR employee stock purchase plans where all of the following apply:
o Purchase price is at least 85 percent of fair market value
o Offering period is 27 months or less, and
o Potential voting power dilution is ten percent or less.
Vote AGAINST employee stock purchase plans where any of the opposite conditions obtain.
SHAREHOLDER PROPOSALS ON COMPENSATION
Vote on a CASE-BY-CASE basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.
10. SOCIAL AND ENVIRONMENTAL ISSUES
These issues cover a wide range of topics, including consumer and public safety, environment and energy, general corporate issues, labor standards and human rights, military business, and workplace diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.
APPENDIX C
PORTFOLIO MANAGERS
Information as of December 31, 2006
INVESTMENTS IN EACH FUND
Name of Portfolio Manager Fund Name Dollar Range of Investments in Each Fund
------------------------- --------- ----------------------------------------
William B. Gerlach Gartmore Small Cap Value Fund None
Gary D. Haubold Gartmore Small Cap Value Fund None
Charles V. Purcell Gartmore Small Cap Value Fund None
Jayne Stevlingson Gartmore Small Cap Growth None
Opportunities Fund
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DESCRIPTION OF COMPENSATION STRUCTURE
Gartmore Mutual Fund Capital Trust ("GMFCT"):
GMFCT uses a compensation structure that is designed to attract and retain high-caliber investment professionals. Portfolio managers are compensated based primarily on the scale and complexity of their portfolio responsibilities and the total return performance of mutual funds, other managed pooled vehicles and managed separate accounts over which they have responsibility, versus appropriate peer groups and benchmarks. Portfolio manager compensation is reviewed annually and may be modified at any time as appropriate to adjust the factors used to determine bonuses or other compensation components.
Each portfolio manager is paid a base salary that GMFCT believes is industry competitive in light of the portfolio manager's experience and responsibility. In addition, each portfolio manager is eligible to receive an annual cash bonus that is derived from both quantitative and non-quantitative factors. Quantitative factors include fund/account performance and the financial performance of GMFCT or its parent company. The performance of the investment companies and other accounts each portfolio manager manages has a paramount impact on such person's compensation. For equity funds, pre-tax performance is measured, on a one-year basis, for each of the previous three calendar years, as compared to each such fund's or account's stated benchmark index. Pre-tax investment performance of most fixed-income portfolio managers is measured against a fund's stated benchmark over various time periods (e.g., on a one- or three-year basis, etc.). Additionally, mutual fund performance is measured against industry peer group rankings, which may provide performance rankings for both shorter periods as well as blended rankings for longer term performance. GMFCT uses this dual approach in order to create incentives for portfolio managers to sustain favorable results from one year to the next, and to reward managers for performance that has improved considerably during the recent period. Less significant in annual compensation determinations are subjective factors as identified by GMFCT's Chief Investment Officer or such other managers as may be appropriate.
The bonus determination components apply on an aggregate basis with respect to all accounts managed by a particular portfolio manager, including unregistered pooled investment vehicles and separate investment advisory accounts. The compensation of portfolio managers with other job responsibilities (such as managerial, providing analytical support for other accounts, etc.) will include consideration of the scope of such responsibilities and the managers' performance in meeting them. Funds and accounts that have performance-based advisory fees are not accorded disproportionate weightings in measuring aggregate portfolio manager performance.
Annual bonuses may vary significantly from one year to the next based on all of these factors. High performing portfolio managers may receive annual bonuses that constitute a substantial portion of their respective total compensation.
Portfolio managers also may be awarded unregistered restricted equity interests in a related NWD Investments entity that typically vest over time and are designed to create incentives to retain key talent and they are
eligible to participate in a non-qualified deferred compensation plan sponsored by Nationwide Mutual Life Insurance Company, GMFCT's ultimate parent company. Such plan affords participating U.S.-based employees the tax benefits of deferring the receipt of a portion of their cash compensation. Portfolio managers also may participate in benefit plans and programs available generally to all GMFCT employees.
OTHER MANAGED ACCOUNTS
The following chart summarizes information regarding accounts other than the Funds for which the portfolio manager has day-to-day management responsibilities. Accounts are grouped into the following three categories: (1) mutual funds; (2) other pooled investment vehicles; and (3) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is provided separately.
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Number of Accounts Managed by Each Portfolio Manager
Name of Portfolio Manager and Total Assets by Category
--------------------------------------------------------------------------------------------------------------------
William Gerlach Mutual Funds: 6 accounts, $2,886,706,636 total assets (1 account,
$50,200,922 total assets for which the advisory fee is based on
performance)
Other Pooled Investment Vehicles: 0 accounts, $0 total assets
Other Accounts: 4 accounts, $252,834,373 total assets
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Gary Haubold Mutual Funds: 10 accounts, $4,925,108,635 total assets (2
accounts, $52,239,433 total assets for which the advisory fee is based
on performance)
Other Pooled Investment Vehicles: 3 accounts, $81,763,580 total assets
Other Accounts: 9 accounts, $2,848,862,535 total assets
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Charles Purcell Mutual Funds: 5 accounts, $1,099,912,348 total assets
Other Pooled Investment Vehicles: 0 accounts, $0 total assets
Other Accounts: 4 accounts, $252,599,861 total assets
--------------------------------------------------------------------------------------------------------------------
Jayne Stevlingson Mutual Funds: 3 accounts, $70,722,972 total assets (2 accounts,
$65,042,850 total assets for which the advisory fee is based on
performance)
Other Pooled Investment Vehicles: 2 accounts, $182,238,997 total assets
Other accounts: 0 accounts, $0 total assets
--------------------------------------------------------------------------------------------------------------------
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POTENTIAL CONFLICTS OF INTEREST
Gartmore Mutual Fund Capital Trust ("GMFCT"):
It is possible that conflicts of interest may arise in connection with the portfolio managers' management of the Funds on the one hand and other accounts for which the portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Funds and other accounts he or she advises. In addition, due to differences in the investment strategies or restrictions between the Funds and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Funds. In some cases, another account managed by the same portfolio manager may compensate GMFCT or its affiliate based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, the portfolio manager will endeavor to exercise his or her discretion in a manner that he or she believes is equitable to all interested persons. The Trust has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
STATEMENT OF ADDITONAL INFORMATION
February 28, 2007
GARTMORE MUTUAL FUNDS
GARTMORE HEDGED CORE EQUITY FUND
Gartmore Mutual Funds (the "Trust") is a registered open-end investment company consisting of 49 series as of the date hereof. This Statement of Additional Information ("SAI") relates to a series of the Trust referenced above (the "Fund").
This SAI is not a prospectus but is incorporated by reference into the prospectus for the Gartmore Hedged Core Equity Fund dated February 28, 2007 (the "Prospectus"). It contains information in addition to and more detailed than that set forth in the Prospectus and should be read in conjunction with the Prospectus.
Terms not defined in this SAI have the meanings assigned to them in the Prospectus. The Prospectus may be obtained from Gartmore Mutual Funds, P.O. Box 182205, Columbus, Ohio 43218-2205, or by calling toll free 800-848-0920.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management plc (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
THE TRUST'S INVESTMENT COMPANY ACT FILE NO.: 811-08495
TABLE OF CONTENTS PAGE
----------------- ---- General Information and History............................................. 1 Additional Information on Portfolio Instruments and Investment Policies..... 1 Description of Portfolio Instruments and Investment Policies................ 2 Investment Restrictions..................................................... 23 Portfolio Turnover.......................................................... 24 Disclosure of Portfolio Holdings............................................ 25 Trustees and Officers of the Trust.......................................... 26 Investment Advisory and Other Services...................................... 35 Brokerage Allocations....................................................... 41 Purchases, Redemptions and Pricing of Shares................................ 43 Systematic Investment Strategies............................................ 45 Investor Privileges......................................................... 45 Investor Services .......................................................... 47 Performance Advertising..................................................... 48 Additional Information...................................................... 49 Additional General Tax Information.......................................... 49 Major Shareholders.......................................................... 55 Financial Statements........................................................ 56 Appendix A - Debt Ratings................................................... A-1 Appendix B - Proxy Voting Guidelines Summaries.............................. B-1 Appendix C - Portfolio Manager ............................................. C-1 |
GENERAL INFORMATION AND HISTORY
Gartmore Mutual Funds (the "Trust"), formerly Nationwide Mutual Funds (until January 25, 2002) and Nationwide Investing Foundation III (until March 1, 2000), is an open-end management investment company formed under the laws of the State of Delaware by a Declaration of Trust dated February 28, 2005. The Trust, originally organized as an Ohio business trust under the laws of the State of Ohio by a Declaration of Trust dated October 30, 1997, redomesticated as a Delaware statutory trust on or about February 28, 2005 in a reorganization approved by vote of the shareholders of the Ohio business trust in a shareholders' meeting on December 23, 2004. In the reorganization, the Ohio business trust transferred all of its assets to the Trust in exchange for shares of the Trust and assumption by the Trust of all of the liabilities of the Ohio business trust. The Trust currently consists of 49 separate series, each with its own investment objective.
The Fund is a diversified fund as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
The Fund invests in a variety of securities and employs a number of investment techniques, which involve certain risks. The Prospectus for the Fund highlights the principal investment strategies, investment techniques and risks. This SAI contains additional information regarding both the principal and non-principal investment strategies of the Fund.
The following table sets forth additional information concerning permissible investment and techniques for the Fund.
Gartmore Hedged Core Equity Fund - Type of Investment or Technique
U.S. common stocks
Preferred stocks
Small company stocks
Special situation companies
Illiquid securities
Restricted securities
When-issued/delayed-delivery securities
Investment companies
Real estate investment trusts (REITS)
Securities of foreign issuers
Depositary receipts
Convertible securities
Short-term debt
Long-term debt when originally issued but with 397 days or less
remaining to maturity
Floating and variable rate securities
Loan participations and assignments
U.S. government securities
Money market instruments
Bank and/or savings and loan obligations
Repurchase agreements
Derivatives
Reverse repurchase agreements
Warrants
Futures
Options
Foreign currencies
Forward currency contracts
Borrowing money
Lending portfolio securities
Short sales
Swap agreements
Indexed securities
Exchange Traded Funds
DESCRIPTION OF PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES
DEBT OBLIGATIONS
Debt obligations are subject to the risk of an issuer's inability to make principal and interest payments, when due, on its obligations ("credit risk") and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, and general market liquidity. Lower-rated securities are more likely to react to developments affecting these risks than are more highly rated securities, which react primarily to movements in the general level of interest rates. Although the fluctuation in the price of debt securities is normally less than that of common stocks, in the past there have been extended periods of cyclical increases in interest rates that have caused significant declines in the price of debt securities in general and have caused the effective maturity of securities with prepayment features to be extended, thus effectively converting short- or intermediate-term securities (which tend to be less volatile in price) into longer term securities (which tend to be more volatile in price).
Ratings as Investment Criteria. High-quality, medium-quality and non-investment grade debt obligations are characterized as such based on their ratings by nationally recognized statistical rating organizations ("NRSROs"), such as Standard & Poor's Rating Group ("Standard & Poor's") or Moody's Investor Services ("Moody's"). In general, the ratings of NRSROs represent the opinions of these agencies as to the quality of securities that they rate. Such ratings, however, are relative and subjective, and are not absolute standards of quality and do not evaluate the market value risk of the securities. These ratings are used by the Fund as initial criteria for the selection of portfolio securities, but the Fund also relies upon the independent advice of the Fund's adviser to evaluate potential investments. This is particularly important for lower-quality securities. Among the factors that will be considered are the long-term ability of the issuer to pay principal and interest and general economic trends, as well as an issuer's capital structure, existing debt and earnings history. Appendix A to this SAI contains further information about the rating categories of NRSROs and their significance.
Subsequent to its purchase by the Fund, an issuer of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund. In addition, it is possible that an NRSRO might not change its rating of a particular issuer to reflect subsequent events. None of these events generally will require sale of such securities, but the Fund's adviser will consider such events in its determination of whether the Fund should continue to hold the securities.
In addition, to the extent that the ratings change as a result of changes in such organizations or their rating systems, or due to a corporate reorganization, the Fund will attempt to use comparable ratings as standards for its investments in accordance with its investment objective and policies.
Medium-Quality Securities. The Fund may invest in medium-quality obligations, which are obligations rated in the fourth highest rating category by any NRSRO. Medium-quality securities, although considered investment-grade, may have some speculative characteristics and may be subject to greater fluctuations in value than higher-rated securities. In addition, the issuers of medium-quality securities may be more vulnerable to adverse economic conditions or changing circumstances than issues of higher-rated securities.
Lower Quality (High-Risk) Securities. Non-investment grade debt or lower quality/rated securities (commonly known as "junk bonds," and hereinafter referred to as "lower-quality securities") include: (i) bonds rated as low as C by Moody's, Standard & Poor's, or Fitch, Inc. ("Fitch") ; (ii) commercial paper rated as low as C by Standard & Poor's, Not Prime by Moody's or Fitch 4 by Fitch; and (iii) unrated debt securities of comparable quality. Lower-quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. There is more risk associated with these investments because of reduced creditworthiness and increased risk of default. Under NRSRO
guidelines, lower-quality securities will likely have some quality and protective characteristics that are outweighed by large uncertainties or major risk exposures to adverse conditions. Lower-quality securities are considered to have extremely poor prospects of ever attaining any real investment standing, to have a current identifiable vulnerability to default or to be in default, to be unlikely to have the capacity to make required interest payments and repay principal when due in the event of adverse business, financial or economic conditions, or to be in default or not current in the payment of interest or principal. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below.
Effect of Interest Rates and Economic Changes. All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher-rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risk than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality and comparable unrated securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be affected adversely by specific corporate developments, the issuer's inability to meet specific projected business forecasts or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower-quality or comparable unrated security defaulted, the Fund might incur additional expenses to seek recovery. Periods of economic uncertainty and changes would also generally result in increased volatility in the market prices of these securities and thus in the Fund's net asset value.
As previously stated, the value of a lower-quality or comparable unrated security will generally decrease in a rising interest rate market, and accordingly so will a Fund's net asset value. If the Fund experiences unexpected net redemptions in such a market, it may be forced to liquidate a portion of its portfolio securities without regard to their investment merits. Due to the limited liquidity of lower-quality and comparable unrated securities (discussed below), the Fund may be forced to liquidate these securities at a substantial discount which would result in a lower rate of return to the Fund.
Payment Expectations. Lower-quality and comparable unrated securities typically contain redemption, call or prepayment provisions which permit the issuer of such securities containing such provisions to, at its discretion, redeem the securities. During periods of falling interest rates, issuers of these securities are likely to redeem or prepay the securities and refinance them with debt securities at a lower interest rate. To the extent an issuer is able to refinance the securities, or otherwise redeem them, the Fund may have to replace the securities with a lower yielding security, which would result in a lower return for the Fund.
Liquidity and Valuation. The Fund may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower-quality and comparable unrated securities, there may be no established retail secondary market for many of these securities. The Fund anticipates that such securities could be sold only to a limited number of dealers or institutional investors. To the extent a secondary trading market does exist, it generally is not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. As a result, the Fund's net asset value and ability to dispose of particular securities, when necessary to meet the Fund's liquidity needs or in response to a specific economic event, may be impacted. The lack of a liquid secondary market for certain securities may also make it more difficult for the Fund to obtain accurate market quotations for purposes of valuing the Fund's portfolio. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. During periods of thin trading, the spread between bid and asked prices is likely to increase significantly. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of lower-quality and comparable unrated securities, especially in a thinly traded market.
U.S. Government Securities. U.S. government securities are issued or guaranteed by the U.S. government or its agencies or instrumentalities. Securities issued by the U.S. government include U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities issued by government agencies or instrumentalities include obligations of the following:
o The Federal Housing Administration, Farmers Home Administration, and the Government National Mortgage Association ("GNMA"), including GNMA pass-through certificates, whose securities are supported by the full faith and credit of the United States;
o The Federal Home Loan Banks whose securities are supported by the right of the agency to borrow from the U.S. Treasury;
o The Federal Farm Credit Banks, government-sponsored institutions that consolidate the financing activities of the Federal Land Banks, the Federal Intermediate Credit Banks and the Banks for Cooperatives; and
o The Federal Home Loan Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA"), whose securities are supported only by the credit of such agencies and are not guaranteed by the U.S. government. However, the Secretary of the Treasury has the authority to support FHLMC and FNMA by purchasing limited amounts of their respective obligations.
Although the U.S. government or it agencies provide financial support to such entities, no assurance can be given that they will always do so. The U.S. government and its agencies and instrumentalities do not guarantee the market value of their securities; consequently, the value of such securities will fluctuate.
The Federal Reserve creates STRIPS (Separate Trading of Registered Interest and Principal of Securities) by separating the coupon payments and the principal payment from an outstanding Treasury security and selling them as individual securities. STRIPS generally trade like zero coupon securities, which do not pay interest periodically, but accrue interest until maturity. To the extent the Fund purchases the principal portion of the STRIPS, the Fund will not receive regular interest payments. Instead they are sold at a deep discount from their face value. Because the principal portion of the STRIPS does not pay current income, its price can be volatile when interest rates change. In calculating its dividend, the Fund takes into account as income a portion of the difference between the principal portion of the STRIPS' purchase price and its face value.
Money Market Instruments. Money market instruments may include the following types of instruments:
o obligations issued or guaranteed as to interest and principal by the U.S. government, its agencies, or instrumentalities, or any federally chartered corporation, with remaining maturities of 397 days or less;
o obligations of sovereign foreign governments, their agencies, instrumentalities and political subdivisions, with remaining maturities of 397 days or less;
o obligations of municipalities and states, their agencies and political subdivisions with remaining maturities of 397 days or less;
o asset-backed commercial paper whose own rating or the rating of any guarantor is in one of the highest categories of any NRSRO;
o repurchase agreements;
o bank and savings and loan obligations;
o commercial paper, which are short-term unsecured promissory notes issued by corporations in order to finance their current operations. It may also be issued by foreign governments, and states and municipalities. Generally the commercial paper or its guarantor will be rated within the top two rating
categories by an NRSRO, or if not rated, is issued and guaranteed as to payment of principal and interest by companies which at the date of investment have a high quality outstanding debt issue;
o bank loan participation agreements representing obligations of corporations having a high quality short-term rating, at the date of investment, and under which the Fund will look to the creditworthiness of the lender bank, which is obligated to make payments of principal and interest on the loan, as well as to creditworthiness of the borrower;
o high quality short-term (maturity in 397 days or less) corporate obligations rated within the top two rating categories by an NRSRO or, if not rated, deemed to be of comparable quality by the applicable adviser;
o extendable commercial notes, which differ from traditional commercial paper because the issuer can extend the maturity of the note up to 397 days with the option to call the note any time during the extension period; and
o unrated short-term (maturity in 397 days or less) debt obligations that are determined by the Fund's adviser to be of compatible quality to the securities described above.
PREFERRED STOCK
Preferred stocks, like some debt obligations, are generally fixed-income
securities. Shareholders of preferred stocks normally have the right to receive
dividends at a fixed rate when and as declared by the issuer's board of
directors, but do not participate in other amounts available for distribution by
the issuing corporation. Dividends on the preferred stock may be cumulative, and
all cumulative dividends usually must be paid prior to shareholders of common
stock receiving any dividends. Because preferred stock dividends must be paid
before common stock dividends, preferred stocks generally entail less risk than
common stocks. Upon liquidation, preferred stocks are entitled to a specified
liquidation preference, which is generally the same as the par or stated value,
and are senior in right of payment to common stock. Preferred stocks are,
however, equity securities in the sense that they do not represent a liability
of the issuer and, therefore, do not offer as great a degree of protection of
capital or assurance of continued income as investments in corporate debt
securities. Preferred stocks generally are subordinated in right of payment to
all debt obligations and creditors of the issuer, and convertible preferred
stocks may be subordinated to other preferred stock of the same issuer.
REPURCHASE AGREEMENTS
In connection with the purchase by the fund of a repurchase agreement from
member banks of the Federal Reserve System or certain non-bank dealers, the
Fund's custodian, or a subcustodian, will have custody of, and will hold in a
segregated account, securities acquired by the Fund under such repurchase
agreement. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Repurchase agreements are considered by the staff of
the Securities and Exchange Commission (the "SEC") to be loans by the Fund.
Repurchase agreements may be entered into with respect to securities of the type
in which the Fund may invest or government securities regardless of their
remaining maturities, and will require that additional securities be deposited
with the Fund's custodian or subcustodian if the value of the securities
purchased should decrease below their resale price. Repurchase agreements
involve certain risks in the event of default or insolvency by the other party,
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying securities, the risk of a possible decline in the value of the
underlying securities during the period in which the Fund seeks to assert its
rights to them, the risk of incurring expenses associated with asserting those
rights and the risk of losing all or part of the income from the repurchase
agreement. The Fund's adviser reviews the creditworthiness of those banks and
non-bank dealers with which the Fund enters into repurchase agreements to
evaluate these risks.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS
When securities are purchased on a "when-issued" basis or purchased for delayed delivery, then payment and delivery occur beyond the normal settlement date at a stated price and yield. When-issued transactions normally settle within 45 days. The payment obligation and the interest rate that will be received on when-issued securities are fixed at the time the buyer enters into the commitment. Due to fluctuations in the value of securities purchased or sold on a when-issued or delayed-delivery basis, the yields obtained on such securities may be higher or lower than the yields available in the market on the dates when the investments are actually delivered to the buyers. The greater the Fund's outstanding commitments for these securities, the greater the exposure to potential fluctuations in the net asset value of the Fund. Purchasing when-issued or delayed-delivery securities may involve the additional risk that the yield or market price available in the market when the delivery occurs may be higher or the market price lower than that obtained at the time of commitment.
If the Fund agrees to purchase when-issued or delayed-delivery securities, to the extent required by the SEC, its custodian will set aside permissible liquid assets equal to the amount of the commitment in a segregated account. Normally, the custodian will set aside portfolio securities to satisfy a purchase commitment, and in such a case the Fund may be required subsequently to place additional assets in the segregated account in order to ensure that the value of the segregated account remains equal to the amount of the Fund's commitment. It may be expected that the Fund's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. In addition, because the Fund will set aside cash or liquid portfolio securities to satisfy its purchase commitments in the manner described above, the Fund's liquidity and the ability of its adviser to manage it might be affected in the event its commitments to purchase "when-issued" securities ever exceed 25% of the value of its total assets. Under normal market conditions, however, the Fund's commitment to purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of the value of its total assets. When the Fund engages in when-issued or delayed-delivery transactions, it relies on the other party to consummate the trade. Failure of the seller to do so may result in the Fund incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
LENDING PORTFOLIO SECURITIES
The Fund may lend its portfolio securities to brokers, dealers and other financial institutions, provided it receives collateral, with respect to the loan of U.S. securities, equal to at least 102% of the value of the portfolio securities loaned, and with respect to each such loan of non-U.S. securities, collateral of at least 105% of the value of the portfolio securities loaned, and at all times thereafter shall require the borrower to mark to market such collateral on a daily basis so that the market value of such collateral does not fall below 100% of the market value of the portfolio securities so loaned. By lending its portfolio securities, the Fund can increase its income through the investment of the cash collateral. For the purposes of this policy, the Fund considers collateral consisting of cash, U.S. government securities or letters of credit issued by qualified banks whose securities meet the standards for investment by the Fund to be the equivalent of cash. From time to time, the Fund may return to the borrower or a third party which is unaffiliated with it, and which is acting as a "placing broker," a part of the interest earned from the investment of collateral received for securities loaned.
The SEC currently requires that the following conditions must be met whenever portfolio securities are loaned: (1) the Fund must receive at least 100% collateral of the type discussed in the preceding paragraph from the borrower; (2) the borrower must increase such collateral whenever the market value of the securities loaned rises above the level of such collateral; (3) the Fund must be able to terminate the loan at any time; (4) the Fund must receive reasonable interest on the loan, as well as any dividends, interest or other distributions payable on the loaned securities, and any increase in market value; (5) the Fund may pay only reasonable custodian fees in connection with the loan; and (6) while any voting rights on the loaned securities may pass to the borrower, the Fund's Board of Trustees must be able to terminate the loan and regain the right to vote the securities if a material event adversely affecting the investment occurs. These conditions may be subject to future modification. Loan agreements involve certain risks in the event of default or insolvency of the other party including possible delays or restrictions upon the Fund's ability to recover the loaned securities or dispose of the collateral for the loan.
INVESTMENT OF SECURITIES LENDING COLLATERAL
The cash collateral received from a borrower as a result of the Fund's securities lending activities will be used to purchase both fixed-income securities and other securities with debt-like characteristics that are rated A1 or
P1 on a fixed rate or floating rate basis, including: bank obligations; commercial paper; investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company; loan participations; master notes; medium term notes; repurchase agreements; and U.S. government securities. Except for the investment agreements, funding agreements or guaranteed investment contracts guaranteed by an insurance company, master notes, and medium term notes (which are described below), these types of investments are described elsewhere in this SAI. Collateral may also be invested in a money market investment company or short-term collective investment trust.
Investment agreements, funding agreements, or guaranteed investment contracts entered into with, or guaranteed by an insurance company are agreements where an insurance company either provides for the investment of the Fund's assets or may provide for a minimum guaranteed rate of return to the investor.
Master notes are promissory notes issued usually with large, creditworthy broker-dealers on either a fixed rate or floating rate basis. Master notes may or may not be collateralized by underlying securities. If the master note is issued by an unrated subsidiary of a broker-dealer, then the unconditional guarantee is provided by the issuer's parent.
Medium-term notes are unsecured, continuously offered corporate debt obligations. Although medium-term notes may be offered with a maturity from one to ten years, in the context of securities lending collateral, the maturity of the medium-term note will not generally exceed two years.
REAL ESTATE INVESTMENT TRUSTS
Although the Fund will not invest in real estate directly, the Fund may invest in securities of real estate investment trusts ("REITs") and other real estate industry companies or companies with substantial real estate investments and, as a result, the Fund may be subject to certain risks associated with direct ownership of real estate and with the real estate industry in general. These risks include, among others: possible declines in the value of real estate; possible lack of availability of mortgage funds; extended vacancies of properties; risks related to general and local economic conditions; overbuilding; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates.
REITs are pooled investment vehicles which invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs. REITs are not taxed on income distributed to shareholders provided they comply with several requirements of Internal Revenue Code of 1986, as amended (the "Code").
CONVERTIBLE SECURITIES
Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into or exchanged for a specified amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. Convertible securities have general characteristics similar to both debt obligations and equity securities. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, the credit standing of the issuer and other factors. The market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. The conversion value of a convertible security is determined by the market price of the underlying common stock. The market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stock and
therefore will react to variations in the general market for equity securities. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer.
A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. Most convertible securities currently are issued by U.S. companies, although a substantial Eurodollar convertible securities market has developed, and the markets for convertible securities denominated in local currencies are increasing.
A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. If a convertible security held by a Fund is called for redemption, the Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock, or sell it to a third party.
Convertible securities generally are subordinated to other similar but non-convertible securities of the same issuer, although convertible bonds, as corporate debt obligations, generally enjoy seniority in right of payment to all equity securities, and convertible preferred stock is senior to common stock of the same issuer. Because of the subordination feature, however, some convertible securities typically are rated below investment grade or are not rated, depending on the general creditworthiness of the issuer.
WARRANTS
Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance), on a specified date, during a specified period, or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants acquired by a Fund in units or attached to securities are not subject to these restrictions. Warrants do not carry with them the right to dividends or voting rights with respect to the securities that they entitle their holder to purchase, and they do not represent any rights in the assets of the issuer. As a result, warrants may be considered more speculative than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date.
INDEXED SECURITIES
The Fund may invest in securities whose potential return is based on the change in particular measurements of value or rates (an "index"). As an illustration, the Fund may invest in a debt security that pays interest and returns principal based on the change in the value of a securities index or a basket of securities. If the Fund invests in such securities, it may be subject to reduced or eliminated interest payments or loss of principal in the event of an adverse movement in the relevant index.
EXCHANGE-TRADED FUNDS
The Fund may invest in exchange-traded funds (ETFs). ETFs are regulated as registered investment companies under the 1940 Act. ETFs are publicly traded trusts that acquire and hold stocks of all companies, or a representative sampling of companies, that are components of a particular index. ETFs are intended to provide investment results that, before expenses, generally correspond to the price and yield performance of the corresponding market index, and the value of their shares should, under normal circumstances, closely track the
value of the index 's underlying component stocks. Because an ETF has operating expenses and transaction costs, while a market index does not, ETFs that track particular indices typically will be unable to match the performance of the index exactly. ETF shares may be purchased and sold in the secondary trading market on a securities exchange, in lots of any size, at any time during the trading day. The Fund will bear its proportionate share of an ETF's operating and transaction costs. As a result, an investment by the Fund in an ETF could cause the Fund's operating expenses to be higher and, in turn, performance to be lower than if it were to invest directly in the securities underlying the ETF.
The shares of an ETF may be assembled in a block (typically 50,000 shares) known as a creation unit and redeemed in kind for a portfolio of the underlying securities (based on the ETF's net asset value) together with a cash payment generally equal to accumulated dividends as of the date of redemption. Conversely, a creation unit may be purchased from the ETF by depositing a specified portfolio of the ETF's underlying securities, as well as a cash payment generally equal to accumulated dividends of the securities (net of expenses) up to the time of deposit. Although the Fund, like most other investors in ETFs, intends to purchase and sell ETF shares primarily in the secondary trading market, the Fund may redeem creation units for the underlying securities (and any applicable cash), and may assemble a portfolio of the underlying securities and use it (and any required cash) to purchase creation units, if the Fund's adviser believes it is in the Fund's best interest to do so.
An investment in an ETF also is subject to all of the risks of investing in the securities held by the ETF. In addition, the market value of the ETF shares may differ from their net asset value because the supply and demand in the market for ETF shares at any point in time is not always identical to the supply and demand in the market for the underlying basket of securities. Because of the ability of large market participants to arbitrage price differences by purchasing or redeeming creation units, the difference between the market value and the net asset value of ETF shares should in most cases be small. Under certain circumstances, an ETF could be terminated. Should termination occur, the ETF might have to liquidate its portfolio securities at a time when the prices for those securities are falling.
SMALL COMPANY STOCKS
Investing in securities of small-sized, including micro-capitalization companies, may involve greater risks than investing in the stocks of larger, more established companies, including possible risk of loss. Also because these securities may have limited marketability, their prices may be more volatile than securities of larger, more established companies or the market averages in general. Because small-sized and emerging growth companies normally have fewer shares outstanding than larger companies, it may be more difficult for the Fund to buy or sell significant numbers of such shares without an unfavorable impact on prevailing prices. Small-sized companies may have limited product lines, markets or financial resources and may lack management depth. In addition, small-sized companies are typically subject to wider variations in earnings and business prospects than are larger, more established companies. There is typically less publicly available information concerning small-sized companies than for larger, more established ones.
SPECIAL SITUATION COMPANIES
"Special situation companies" include those involved in an actual or prospective acquisition or consolidation; reorganization; recapitalization; merger, liquidation or distribution of cash, securities or other assets; a tender or exchange offer; a breakup or workout of a holding company; or litigation which, if resolved favorably, would improve the value of the company's stock. If the actual or prospective situation does not materialize as anticipated, the market price of the securities of a "special situation company" may decline significantly. Therefore, an investment in the Fund, to the extent that it invests a significant portion of its assets in these securities, may involve a greater degree of risk than an investment in other mutual funds that seek long-term growth of capital by investing in better-known, larger companies. The Fund's adviser believes, however, that if the adviser analyzes "special situation companies" carefully and invests in the securities of these companies at the appropriate time, the Fund may achieve capital growth. There can be no assurance however, that a special situation that exists at the time the Fund makes its investment will be consummated under the terms and within the time period contemplated, if it is consummated at all.
FOREIGN SECURITIES
Investing in foreign securities (including through the use of depositary receipts) involves certain special considerations which typically are not associated with investing in securities in the United States. Since investments in foreign companies will frequently involve currencies of foreign countries, and since the Fund may hold securities and funds in foreign currencies, the Fund may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations, if any, and may incur costs in connection with conversions between various currencies. Most foreign stock markets, while growing in volume of trading activity, have less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of comparable domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than in the United States and, at times, volatility of price can be greater than in the United States. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on United States exchanges, although each Fund endeavors to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers and listed companies in foreign countries than in the United States. In addition, with respect to certain foreign countries, there is the possibility of exchange control restrictions, expropriation or confiscatory taxation, and political, economic or social instability, which could affect investments in those countries. Foreign securities, such as those purchased by the Fund, may be subject to foreign government taxes, higher custodian fees, higher brokerage costs and dividend collection fees which could reduce the yield on such securities.
Foreign economies may differ favorably or unfavorably from the U.S. economy in various respects, including growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency, and balance of payments positions. Many foreign securities are less liquid and their prices more volatile than comparable U.S. securities. From time to time, foreign securities may be difficult to liquidate rapidly without adverse price effects.
Trading in futures contracts on foreign commodity exchanges may be subject to the same or similar risks as trading in foreign securities.
Depositary Receipts. The Fund may invest in foreign securities by purchasing depositary receipts, including American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or other securities convertible into securities of issuers based in foreign countries. These securities may not necessarily be denominated in the same currency as the securities which they represent. Generally, ADRs, in registered form, are denominated in U.S. dollars and are designed for use in the U.S. securities markets, GDRs, in bearer form, are issued and designed for use outside the United States and EDRs (also referred to as Continental Depositary Receipts ("CDRs")), in bearer form, may be denominated in other currencies and are designed for use in European securities markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities. EDRs are European receipts evidencing a similar arrangement. GDRs are receipts typically issued by non-U.S. banks and trust companies that evidence ownership of either foreign or domestic securities. For purposes of the Fund's investment policies, ADRs, GDRs and EDRs are deemed to have the same classification as the underlying securities they represent. Thus, an ADR, GDR or EDR representing ownership of common stock will be treated as common stock.
The Fund may invest in depositary receipts through "sponsored" or "unsponsored" facilities. While depositary receipts issued under these two types of facilities are in some respects similar, there are distinctions between them relating to the rights and obligations of depositary receipt holders and the practices of market participants.
A depositary may establish an unsponsored facility without participation by (or even necessarily the acquiescence of) the issuer of the deposited securities, although typically the depositary requests a letter of non-objection from such issuer prior to the establishment of the facility. Holders of unsponsored ADRs generally bear all the costs of such facilities. The depositary usually charges fees upon the deposit and withdrawal of the deposited securities, the conversion of dividends into U.S. dollars, the disposition of non-cash distributions, and the performance of other services. The depositary of an unsponsored facility frequently is under no obligation to pass through voting rights to ADR holders in respect of the deposited securities. In addition, an unsponsored facility is generally not obligated to distribute communications received from the issuer of the deposited securities or to disclose material information about such issuer in the U.S. and thus there may not be a correlation between such information and the market value of the depositary receipts. Unsponsored ADRs tend to be less liquid than sponsored ADRs.
Sponsored ADR facilities are created in generally the same manner as unsponsored facilities, except that the issuer of the deposited securities enters into a deposit agreement with the depositary. The deposit agreement sets out the rights and responsibilities of the issuer, the depositary, and the ADR holders. With sponsored facilities, the issuer of the deposited securities generally will bear some of the costs relating to the facility (such as dividend payment fees of the depositary), although ADR holders continue to bear certain other costs (such as deposit and withdrawal fees). Under the terms of most sponsored arrangements, depositaries agree to distribute notices of shareholder meetings and voting instructions, and to provide shareholder communications and other information to the ADR holders at the request of the issuer of the deposited securities.
SHORT SELLING OF SECURITIES
In a short sale of securities, the Fund sells stock which it does not own, making delivery with securities "borrowed" from a broker. The Fund is then obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. This price may or may not be less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay the lender any dividends or interest which accrue during the period of the loan. In order to borrow the security, the Fund may also have to pay a premium and/or interest which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. In addition, the broker may require the deposit of collateral (generally, up to 50% of the value of the securities sold short).
The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in price between those two dates. The amount of any gain will be decreased and the amount of any loss will be increased by any premium or interest the Fund may be required to pay in connection with the short sale. When a cash dividend is declared on a security for which the Fund has a short position, the Fund incurs the obligation to pay an amount equal to that dividend to the lender of the shorted security. However, any such dividend on a security sold short generally reduces the market value of the shorted security, thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on its short-sale transaction. Whether the Fund will be successful in utilizing a short sale will depend, in part, on the ability of the Fund's adviser to predict correctly whether the price of a security it borrows to sell short will decrease.
In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. The Fund must segregate or earmark an amount of cash or other liquid assets equal to the difference between (a) the market value of securities sold short at the time that they were sold short and (b) the value of the collateral deposited with the broker to meet margin requirements in connection with the short sale (not including the proceeds from the short sale). While the short position is open, the Fund must maintain on a daily basis segregated or earmarked liquid assets at such a level that the amount segregated or earmarked plus the amount of collateral deposited with the broker as margin equals the current market value of the securities sold short.
The Fund also may engage in short sales, if at the time of the short sale the Fund owns or has the right to obtain without additional cost an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." The Fund does not intend to engage in short sales against the box for investment purposes. The Fund may, however, make a short sale as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund (or a security convertible or exchangeable for such security), or when the Fund wants to sell the security at an attractive current price. In such a case, any future losses in the Fund's long position should be offset by a gain in the short position and, conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns. There will be certain additional transaction costs associated with short sales against the box. For tax purposes, the Fund that enters into a short sale "against the box" may be treated as having made a constructive sale of an "appreciated financial position," causing the Fund to realize gain, but not loss.
RESTRICTED, NON-PUBLICLY TRADED AND ILLIQUID SECURITIES
The Fund may not invest more than 15% of its net assets, in the aggregate, in illiquid securities, including repurchase agreements which have a maturity of longer than seven days, time deposits maturing in more than seven days and securities that are illiquid because of the absence of a readily available market or legal or contractual restrictions on resale or other factors limiting the marketability of the security. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Unless subsequently registered for sale, these securities can only be sold in privately negotiated transactions or pursuant to an exemption from registration. The Fund typically does not hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities, and an the Fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. The Fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
The SEC has adopted Rule 144A which allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers.
Any such restricted securities will be considered to be illiquid for purposes of the Fund's limitations on investments in illiquid securities unless, pursuant to procedures adopted by the Board of Trustees of the Trust, the Fund's adviser has determined such securities to be liquid because such securities are eligible for resale pursuant to Rule 144A and are readily saleable. To the extent that qualified institutional buyers may become uninterested in purchasing Rule 144A securities, the Fund's level of illiquidity may increase.
The Fund may sell over-the-counter ("OTC") options and, in connection therewith, segregate assets or cover its obligations with respect to OTC options written by the Fund. The assets used as cover for OTC options written by the Fund will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Fund may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC option written subject to this procedure would be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option.
The Fund's adviser will monitor the liquidity of restricted securities in
the portion of the Fund it manages. In reaching liquidity decisions, the
following factors are considered: (1) the unregistered nature of the security;
(2) the frequency of trades and quotes for the security; (3) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (4) dealer undertakings to make a market in the security
and (5) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
Private Placement Commercial Paper. Commercial paper eligible for resale under Section 4(2) of the Securities Act is offered only to accredited investors. Rule 506 of Regulation D in the Securities Act lists investment companies as accredited investors.
Section 4(2) paper not eligible for resale under Rule 144A under the Securities Act shall be deemed liquid if (1) the Section 4(2) paper is not traded flat or in default as to principal and interest; (2) the Section 4(2) paper is rated in one of the two highest rating categories by at least two NRSROs, or if only one NRSRO rates the security, it is rated in one of the two highest categories by that NRSRO; and (3) the adviser believes that, based on the trading markets for such security, such security can be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the security.
BORROWING
The Fund may borrow money from banks, limited by the Fund's fundamental investment restriction (generally, 331/3% of its total assets (including the amount borrowed)), including borrowings for temporary or emergency purposes. The Fund may engage in mortgage dollar roll and reverse repurchase agreements which may be considered a form of borrowing unless the Fund covers its exposure by segregating or earmarking liquid assets.
DERIVATIVE INSTRUMENTS
The Fund's adviser may use a variety of derivative instruments, including options, futures contracts (sometimes referred to as "futures"), options on futures contracts, stock index options, forward currency contracts, swaps and structured contracts, to hedge the Fund's portfolio or for risk management or for any other permissible purposes consistent with the Fund's investment objective. Derivative instruments are securities or agreements with their values based on the value of an underlying asset (e.g., a security, currency or index) or the level of a reference index.
Derivatives generally have investment characteristics that are based upon either forward contracts (under which one party is obligated to buy and the other party is obligated to sell an underlying asset at a specific price on a specified date) or option contracts (under which the holder of the option has the right but not the obligation to buy or sell an underlying asset at a specified price on or before a specified date). Consequently, the change in value of a forward-based derivative generally is roughly proportional to the change in value of the underlying asset. In contrast, the buyer of an option-based derivative generally will benefit from favorable movements in the price of the underlying asset but is not exposed to the corresponding losses that result from adverse movements in the value of the underlying asset. The seller (writer) of an option-based derivative generally will receive fees or premiums but generally is exposed to losses resulting from changes in the value of the underlying asset. Derivative transactions may include elements of leverage and, accordingly, the fluctuation of the value of the derivative transaction in relation to the underlying asset may be magnified.
The use of these instruments is subject to applicable regulations of the SEC, the several options and futures exchanges upon which they may be traded, and the Commodity Futures Trading Commission ("CFTC").
Special Risks of Derivative Instruments. The use of derivative instruments involves special considerations and risks as described below. Risks pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the Fund's adviser's ability to predict movements of the overall securities and currency markets, which requires skills different from those necessary for predicting changes in the prices of individual securities. There can be no assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation, between price movements of an instrument and price movements of investments being hedged. For example, if the value of an instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be fully successful. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. The effectiveness of hedges using instruments on indices will depend on the degree of correlation between price movements in the index and price movements in the investments being hedged, as well as, how similar the index is to the portion of the Fund's assets being hedged in terms of securities composition.
(3) Hedging strategies, if successful, can reduce the risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments. For example, if the Fund entered into a short hedge because the Fund's adviser projected a decline in the price of a security in the Fund's portfolio, and the price of that security increased instead, the gain from that increase might be wholly or partially offset by a decline in the price of the instrument. Moreover, if the price of the instrument declined by more than the increase in the price of the security, the Fund could suffer a loss.
(4) As described below, the Fund might be required to maintain assets as "cover," maintain segregated accounts, or make margin payments when it takes positions in these instruments involving obligations to third parties (i.e., instruments other than purchased options). If the Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time. The Fund's ability to close out a position in an instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction ("counterparty") to enter into a transaction closing out the position. Therefore, there is no assurance that any hedging position can be closed out at a time and price that is favorable to the Fund.
Options. The Fund may purchase or write put and call options on securities and indices, and may purchase options on foreign currencies and interest rates, and enter into closing transactions with respect to such options to terminate an existing position. The purchase of call options serves as a long hedge, and the purchase of put options serves as a short hedge. Writing put or call options can enable the Fund to enhance income by reason of the premiums paid by the purchaser of such options. Writing call options serves as a limited short hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security appreciates to a price higher than the exercise price of the call option, it can be expected that the option will be exercised, and the Fund will be obligated to sell the security at less than its market value or will be obligated to purchase the security at a price greater than that at which the security must be sold under the option. All or a portion of any assets used as cover for OTC options written by the Fund would be considered illiquid to the extent described under "Restricted, Non-Publicly Traded and Illiquid Securities" above. Writing put options serves as a limited long hedge because increases in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security depreciates to a price lower than the exercise price of the put option, it can be expected that the put option will be exercised, and the Fund will be obligated to purchase the security at more than its market value.
The value of an option position will reflect, among other things, the historical price volatility of the underlying investment, the current market value of the underlying investment, the time remaining until expiration of the option, the relationship of the exercise price to the market price of the underlying investment, and general market conditions. Options that expire unexercised have no value. Options used by the Fund may include European-style options, which can only be exercised at expiration. This is in contrast to American-style options which can be exercised at any time prior to the expiration date of the option.
The Fund may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, the Fund may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, the Fund may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Fund to realize the profit or limit the loss on an option position prior to its exercise or expiration.
The Fund may purchase or write both OTC options and options traded on foreign and U.S. exchanges. Exchange-traded options are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded option transaction. OTC options are contracts between the Fund and the counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when the Fund purchases or writes an OTC option, it relies on the counterparty to make or take
delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premium paid by the Fund as well as the loss of any expected benefit of the transaction.
The Fund's ability to establish and close out positions in exchange-listed options depends on the existence of a liquid market. The Fund intends to purchase or write only those exchange-traded options for which there appears to be a liquid secondary market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. Although the Fund will enter into OTC options only with counterparties that are expected to be capable of entering into closing transactions with the Fund, there is no assurance that the Fund will in fact be able to close out an OTC option at a favorable price prior to expiration. In the event of insolvency of the counterparty, the Fund might be unable to close out an OTC option position at any time prior to its expiration.
If the Fund is unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by the Fund could cause material losses because the Fund would be unable to sell the investment used as a cover for the written option until the option expires or is exercised.
The Fund may engage in options transactions on indices in much the same manner as the options on securities discussed above, except that index options may serve as a hedge against overall fluctuations in the securities markets in general.
The writing and purchasing of options is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. Imperfect correlation between the options and securities markets may detract from the effectiveness of attempted hedging.
Transactions using OTC options (other than purchased options) expose the Fund to counterparty risk. To the extent required by SEC guidelines, the Fund will not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities, other options, or futures or (2) cash and liquid obligations with a value sufficient at all times to cover their potential obligations to the extent not covered as provided in (1) above. The Fund will also set aside cash and/or appropriate liquid assets in a segregated custodial account if required to do so by the SEC and CFTC regulations. Assets used as cover or held in a segregated account cannot be sold while the position in the corresponding option or futures contract is open, unless they are replaced with similar assets. As a result, the commitment of a large portion of the Fund's assets to segregated accounts as a cover could impede portfolio management's or the Fund's ability to meet redemption requests or other current obligations.
An interest rate option is an agreement with a counterparty giving the buyer the right but not the obligation to buy or sell one of an interest rate hedging vehicle (such as a treasury future or interest rate swap) at a future date at a predetermined price. The option buyer would pay a premium at the inception of the agreement. An interest rate option can be used to actively manage the Fund's interest rate risk with respect to either an individual bond or an overlay of the entire portfolio.
Spread Transactions. The Fund may purchase covered spread options from securities dealers. Such covered spread options are not presently exchange-listed or exchange-traded. The purchase of a spread option gives the Fund the right to put, or sell, a security that it owns at a fixed dollar spread or fixed yield spread in relationship to another security that the Fund does not own, but which is used as a benchmark. The risk to the Fund in purchasing covered spread options is the cost of the premium paid for the spread option and any transaction costs. In addition, there is no assurance that closing transactions will be available. The purchase of spread options will be used to protect the Fund against adverse changes in prevailing credit quality spreads (i.e., the yield spread between high quality and lower quality securities). Such protection is only provided during the life of the spread option.
Futures Contracts. The Fund may enter into futures contracts, including interest rate, index, and currency futures, and purchase and write (sell) related options. The purchase of futures or call options thereon can serve as a long hedge, and the sale of futures or the purchase of put options thereon can serve as a short hedge. Writing covered call options on futures contracts can serve as a limited short hedge, and writing covered put options on futures contracts can serve as a limited long hedge, using a strategy similar to that used for writing covered options
in securities. The Fund's hedging may include purchases of futures as an offset against the effect of expected increases in securities prices or currency exchange rates and sales of futures as an offset against the effect of expected declines in securities prices or currency exchange rates. The Fund may write put options on futures contracts while at the same time purchasing call options on the same futures contracts in order to create synthetically a long futures contract position. Such options would have the same strike prices and expiration dates. The Fund will engage in this strategy only when the Fund's adviser believes it is more advantageous to the Fund than purchasing the futures contract.
To the extent required by regulatory authorities, the Fund will only enter into futures contracts that are traded on U.S. or foreign exchanges or boards of trade approved by the CFTC and are standardized as to maturity date and underlying financial instrument. These transactions may be entered into for "bona fide hedging" purposes as defined in CFTC regulations and other permissible purposes including increasing return and hedging against changes in the value of portfolio securities due to anticipated changes in interest rates, currency values and/or market conditions.
The Fund will not enter into futures contracts and related options for other than "bona fide hedging" purposes for which the aggregate initial margin and premiums required to establish positions exceed 5% of the Fund's net asset value after taking into account unrealized profits and unrealized losses on any such contracts it has entered into. There is no overall limit on the percentage of the Fund's assets that may be at risk with respect to futures activities. Although techniques other than sales and purchases of futures contracts could be used to reduce the Fund's exposure to market, currency, or interest rate fluctuations, the Fund may be able to hedge its exposure more effectively and perhaps at a lower cost through using futures contracts.
A futures contract provides for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument (e.g., debt security) or currency for a specified price at a designated date, time, and place. An index futures contract is an agreement pursuant to which the parties agree to take or make delivery of an amount of cash equal to a specified multiplier times the difference between the value of the index at the close of the last trading day of the contract and the price at which the index futures contract was originally written. Transaction costs are incurred when a futures contract is bought or sold and margin deposits must be maintained. A futures contract may be satisfied by delivery or purchase, as the case may be, of the instrument or the currency, or by payment of the change in the cash value of the index. More commonly, futures contracts are closed out prior to delivery by entering into an offsetting transaction in a matching futures contract. Although the value of an index might be a function of the value of certain specified securities, no physical delivery of those securities is made. If the offsetting purchase price is less than the original sale price, the Fund realizes a gain; if it is more, a Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, the Fund realizes a gain; if it is less, the Fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that the Fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain the margin deposits on the futures contract.
No price is paid by the Fund upon entering into a futures contract. Instead, at the inception of a futures contract, the Fund is required to deposit in a segregated account with its custodian, in the name of the futures broker through whom the transaction was effected, "initial margin" consisting of cash, U.S. government securities or other liquid obligations, in an amount generally equal to 10% or less of the contract value. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Unlike margin in securities transactions, initial margin on futures contracts does not represent a borrowing, but rather is in the nature of a performance bond or good-faith deposit that is returned to the Fund at the termination of the transaction if all contractual obligations have been satisfied. Under certain circumstances, such as periods of high volatility, the Fund may be required by an exchange to increase the level of its initial margin payment, and initial margin requirements might be increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures broker daily as the value of the futures position varies, a process known as "marking to market." Variation margin does not involve borrowing, but rather represents a daily settlement of the Fund's obligations to or from a futures broker. When the Fund purchases an option on a future, the premium paid plus transaction costs is all that is at risk. In contrast, when the Fund purchases or sells a futures contract or writes a call or put option thereon, it is subject to daily variation margin calls
that could be substantial in the event of adverse price movements. If the Fund has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous. Purchasers and sellers of futures positions and options on futures can enter into offsetting closing transactions by selling or purchasing, respectively, an instrument identical to the instrument held or written. Positions in futures and options on futures may be closed only on an exchange or board of trade on which they were entered into (or through a linked exchange). Although the Fund intends to enter into futures transactions only on exchanges or boards of trade where there appears to be an active market, there can be no assurance that such a market will exist for a particular contract at a particular time.
Under certain circumstances, futures exchanges may establish daily limits on the amount that the price of a future or option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.
If the Fund were unable to liquidate a futures contract or option on a futures contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses, because it would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the futures market might increase the risk that movements in the prices of futures contracts or options on futures contracts might not correlate perfectly with movements in the prices of the investments being hedged. For example, all participants in the futures and options on futures contracts markets are subject to daily variation margin calls and might be compelled to liquidate futures or options on futures contracts positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, because initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the future markets. This participation also might cause temporary price distortions. In addition, activities of large traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions.
Swap Agreements. The Fund may enter into interest rate, securities index, commodity, or security and currency exchange rate swap agreements for any lawful purpose consistent with the Fund's investment objective, such as for the purpose of attempting to obtain or preserve a particular desired return or spread at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return or spread. The Fund also may enter into swaps in order to protect against an increase in the price of, or the currency exchange rate applicable to, securities that the Fund anticipates purchasing at a later date. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from one or more days to several years. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," (i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency) or in a "basket" of securities representing a particular index. Swap agreements may include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; interest rate floors under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and interest rate collars, under which a party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. "Total return swaps" are contracts in which one party agrees to make payments of the total return from the underlying asset during the specified period, in return for payments equal to a fixed or floating rate of interest or the total return from another underlying asset.
The "notional amount" of the swap agreement is the agreed upon basis for calculating the obligations that the parties to a swap agreement have agreed to exchange. Under most swap agreements entered into by the Fund, the obligations of the parties would be exchanged on a "net basis." Consequently, the Fund's obligation (or rights) under
a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the "net amount"). The Fund's obligation under a swap agreement will be accrued daily (offset against amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of cash or liquid assets.
Whether the Fund's use of swap agreements will be successful in furthering its investment objective will depend, in part, on the Fund's adviser's ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Swap agreements may be considered to be illiquid. Moreover, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The swaps market is largely unregulated.
The Fund will enter swap agreements only with counterparties that the Fund's adviser reasonably believes are capable of performing under the swap agreements. If there is a default by the other party to such a transaction, the Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction.
Structured Products. The Fund may use structured products to hedge its portfolio. Structured products generally are individually negotiated agreements and may be traded over-the-counter. They are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans) and the issuance by that entity of one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments.
With respect to structured products, because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there is currently no active trading market for these securities.
Hybrid Instruments. Hybrid instruments combine elements of derivative contracts with those of another security (typically a fixed-income security). All or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of an underlying asset or by reference to another benchmark (such as interest rates, currency exchange rates or indices). Hybrid instruments also include convertible securities with conversion terms related to an underlying asset or benchmark.
The risks of investing in hybrid instruments reflect a combination of the risks of investing in securities, options, futures and currencies, and depend upon the terms of the instrument. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional fixed-income or convertible securities. Hybrid instruments are also potentially more volatile and carry greater interest rate risks than traditional instruments. Moreover, depending on the structure of the particular hybrid, it may expose the Fund to leverage risks or carry liquidity risks.
Credit Linked Notes. A credit linked note ("CLN") is a type of hybrid instrument in which a special purpose entity issues a structured note (the "Note Issuer") that is intended to replicate a corporate bond or a portfolio of corporate bonds. The purchaser of the CLN (the "Note Purchaser") invests a par amount and receives a payment during the term of the CLN that equals a fixed or floating rate of interest equivalent to a high rated funded asset (such as a bank certificate of deposit) plus an additional premium that relates to taking on the credit risk of an identified bond (the "Reference Bond"). Upon maturity of the CLN, the Note Purchaser will receive a payment equal to: (i) the original par amount paid to the Note Issuer, if there is neither a designated event of default (an "Event of Default") with respect to the Reference Bond nor a restructuring of the issuer of the Reference Bond (a
"Restructuring Event"); or (ii) the value of the Reference Bond if an Event of Default or a Restructuring Event has occurred. Depending upon the terms of the CLN, it is also possible that the Note Purchaser may be required to take physical delivery of the Reference Bond if an Event of Default or a Restructuring Event occurs.
Foreign Currency-Related Derivative Strategies - Special Considerations. The Fund may use options and futures and options on futures on foreign currencies and forward currency contracts to hedge against movements in the values of the foreign currencies in which the Fund's securities are denominated. The Fund may engage in currency exchange transactions to protect against uncertainty in the level of future exchange rates and may also engage in currency transactions to increase income and total return. Such currency hedges can protect against price movements in a security the Fund owns or intends to acquire that are attributable to changes in the value of the currency in which it is denominated. Such hedges do not, however, protect against price movements in the securities that are attributable to other causes.
The Fund might seek to hedge against changes in the value of a particular currency when no hedging instruments on that currency are available or such hedging instruments are more expensive than certain other hedging instruments. In such cases, the Fund may hedge against price movements in that currency by entering into transactions using hedging instruments on another foreign currency or a basket of currencies, the values of which the Fund's adviser believes will have a high degree of positive correlation to the value of the currency being hedged. The risk that movements in the price of the hedging instrument will not correlate perfectly with movements in the price of the currency being hedged is magnified when this strategy is used.
The value of derivative instruments on foreign currencies depends on the value of the underlying currency relative to the U.S. dollar. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such hedging instruments, the Fund could be disadvantaged by having to deal in the odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign currencies or any regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Quotation information generally is representative of very large transactions in the interbank market and thus might not reflect odd-lot transactions where rates might be less favorable. The interbank market in foreign currencies is a global, round-the-clock market. To the extent the U.S. options or futures markets are closed while the markets for the underlying currencies remain open, significant price and rate movements might take place in the underlying markets that cannot be reflected in the markets for the derivative instruments until they reopen.
Settlement of derivative transactions involving foreign currencies might be required to take place within the country issuing the underlying currency. Thus, the Fund might be required to accept or make delivery of the underlying foreign currency in accordance with any U.S. or foreign regulations regarding the maintenance of foreign banking arrangements by U.S. residents and might be required to pay any fees, taxes and charges associated with such delivery assessed in the issuing country.
Permissible foreign currency options will include options traded primarily in the OTC market. Although options on foreign currencies are traded primarily in the OTC market, the Fund will normally purchase OTC options on foreign currency only when the Fund's adviser believes a liquid secondary market will exist for a particular option at any specific time.
FORWARD CURRENCY CONTRACTS
A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers.
At or before the maturity of a forward contract, the Fund may either sell a portfolio security and make delivery of the currency, or retain the security and fully or partially offset its contractual obligation to deliver the currency by purchasing a second contract. If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction, will incur a gain or a loss to the extent that movement has occurred in forward contract prices.
The precise matching of forward currency contract amounts and the value of the securities involved generally will not be possible because the value of such securities, measured in the foreign currency, will change after the foreign currency contract has been established. Thus, the Fund might need to purchase or sell foreign currencies in the spot (cash) market to the extent such foreign currencies are not covered by forward contracts. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain.
Currency Hedging. While the values of forward currency contracts, currency options, currency futures and options on futures may be expected to correlate with exchange rates, they will not reflect other factors that may affect the value of the Fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect the Fund against price decline if the issuer's creditworthiness deteriorates. Because the value of the Fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, a currency hedge may not be entirely successful in mitigating changes in the value of the Fund's investments denominated in that currency over time.
A decline in the dollar value of a foreign currency in which the Fund's securities are denominated will reduce the dollar value of the securities, even if their value in the foreign currency remains constant. The use of currency hedges does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In order to protect against such diminutions in the value of securities it holds, the Fund may purchase put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell the currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its securities that otherwise would have resulted. Conversely, if a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby potentially increasing the cost of the securities, the Fund may purchase call options on the particular currency. The purchase of these options could offset, at least partially, the effects of the adverse movements in exchange rates. Although currency hedges limit the risk of loss due to a decline in the value of a hedged currency, at the same time, they also limit any potential gain that might result should the value of the currency increase.
The Fund may enter into foreign currency exchange transactions to hedge its currency exposure in specific transactions or portfolio positions or, in some instances, to adjust its currency exposure relative to its benchmark. Transaction hedging is the purchase or sale of forward currency with respect to specific receivables or payables of the Fund generally accruing in connection with the purchase or sale of its portfolio securities. Position hedging is the sale of forward currency with respect to portfolio security positions. The Fund may not position hedge to an extent greater than the aggregate market value (at the time of making such sale) of the hedged securities.
FLOATING AND VARIABLE RATE INSTRUMENTS
Floating or variable rate obligations bear interest at rates that are not fixed, but vary with changes in specified market rates or indices, such as the prime rate, or at specified intervals. The interest rate on floating-rate securities varies with changes in the underlying index (such as the Treasury bill rate), while the interest rate on variable or adjustable rate securities changes at preset times based upon an underlying index. Certain of the floating or variable rate obligations that may be purchased by the Fund may carry a demand feature that would permit the holder to tender them back to the issuer of the instrument or to a third party at par value prior to maturity.
Some of the demand instruments purchased by the Fund may not be traded in a secondary market and derive their liquidity solely from the ability of the holder to demand repayment from the issuer or third party providing credit support. If a demand instrument is not traded in a secondary market, the Fund will nonetheless treat the instrument as "readily marketable" for the purposes of its investment restriction limiting investments in illiquid securities unless the demand feature has a notice period of more than seven days in which case the instrument will be characterized as "not readily marketable" and therefore illiquid.
Such obligations include variable rate master demand notes, which are unsecured instruments issued pursuant to an agreement between the issuer and the holder that permit the indebtedness thereunder to vary and to
provide for periodic adjustments in the interest rate. The Fund will limit its purchases of floating and variable rate obligations to those of the same quality as it is otherwise allowed to purchase. The Fund's adviser will monitor on an ongoing basis the ability of an issuer of a demand instrument to pay principal and interest on demand.
The Fund's right to obtain payment at par on a demand instrument could be affected by events occurring between the date the Fund elects to demand payment and the date payment is due that may affect the ability of the issuer of the instrument or third party providing credit support to make payment when due, except when such demand instruments permit same day settlement. To facilitate settlement, these same day demand instruments may be held in book entry form at a bank other than the Fund's custodian subject to a subcustodian agreement approved by the Fund between that bank and the Fund's custodian.
SECURITIES OF INVESTMENT COMPANIES
As permitted by the 1940 Act, the Fund may invest up to 10% of its total assets, calculated at the time of investment, in the securities of other open-end or closed-end investment companies. No more than 5% of the Fund's total assets may be invested in the securities of any one investment company nor may it acquire more than 3% of the voting securities of any other investment company. The Fund indirectly will bear its proportionate share of any management fees paid by an investment company in which it invests in addition to the advisory fee paid by the Fund. Some of the countries in which the Fund may invest may not permit direct investment by outside investors. Investments in such countries may only be permitted through foreign government-approved or government-authorized investment vehicles, which may include other investment companies.
BANK OBLIGATIONS
Bank obligations that may be purchased by the Fund include certificates of deposit, banker's acceptances and fixed time deposits. A certificate of deposit is a short-term negotiable certificate issued by a commercial bank against funds deposited in the bank and is either interest-bearing or purchased on a discount basis. A banker's acceptance is a short-term draft drawn on a commercial bank by a borrower, usually in connection with an international commercial transaction. The borrower is liable for payment as is the bank, which unconditionally guarantees to pay the draft at its face amount on the maturity date. Fixed time deposits are obligations of branches of U.S. banks or foreign banks which are payable at a stated maturity date and bear a fixed rate of interest. Although fixed time deposits do not have a market, there are no contractual restrictions on the right to transfer a beneficial interest in the deposit to a third party.
Bank obligations may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulation. Bank obligations may be issued by domestic banks (including their branches located outside the United States), domestic and foreign branches of foreign banks and savings and loan associations.
Eurodollar and Yankee Obligations. Eurodollar bank obligations are dollar-denominated certificates of deposit and time deposits issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. Yankee bank obligations are dollar-denominated obligations issued in the U.S. capital markets by foreign banks.
Eurodollar and Yankee bank obligations are subject to the same risks that pertain to domestic issues, notably credit risk, market risk and liquidity risk. Additionally, Eurodollar (and to a limited extent, Yankee) bank obligations are subject to certain sovereign risks. One such risk is the possibility that a sovereign country might prevent capital, in the form of dollars, from flowing across their borders. Other risks include: adverse political and economic developments; the extent and quality of government regulation of financial markets and institutions; the imposition of foreign withholding taxes, and the expropriation or nationalization of foreign issues. However, Eurodollar and Yankee bank obligations held in the Fund will undergo the same credit analysis as domestic issuers in which the Fund invests, and will have at least the same financial strength as the domestic issuers approved for the Fund.
LOAN PARTICIPATIONS AND ASSIGNMENTS
Loan Participations typically will result in the Fund having a contractual relationship only with the lender, not with the borrower. The Fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Loan Participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Fund will assume the credit risk of both the borrower and the lender that is selling the Participation. In the event of the insolvency of the lender selling a Participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. The Fund will acquire Loan Participations only if the lender interpositioned between the Fund and the borrower is determined by the applicable adviser to be creditworthy. When the Fund purchases Assignments from lenders, the Fund will acquire direct rights against the borrower on the loan, except that under certain circumstances such rights may be more limited than those held by the assigning lender.
The Fund may have difficulty disposing of Assignments and Loan Participations. Because the market for such instruments is not highly liquid, the Fund anticipates that such instruments could be sold only to a limited number of institutional investors. The lack of a highly liquid secondary market may have an adverse impact on the value of such instruments and will have an adverse impact on the Fund's ability to dispose of particular Assignments or Loan Participations in response to a specific economic event, such as deterioration in the creditworthiness of the borrower.
In valuing a Loan Participation or Assignment held by the Fund for which a secondary trading market exists, the Fund will rely upon prices or quotations provided by banks, dealers or pricing services. To the extent a secondary trading market does not exist, the Fund's Loan Participations and Assignments will be valued in accordance with procedures adopted by the Board of Trustees, taking into consideration, among other factors: (i) the creditworthiness of the borrower under the loan and the lender; (ii) the current interest rate; period until next rate reset and maturity of the loan; (iii) recent prices in the market for similar loans; and (iv) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.
REVERSE REPURCHASE AGREEMENTS
The Fund may engage in reverse repurchase agreements to facilitate portfolio liquidity, a practice common in the mutual fund industry, or for arbitrage transactions discussed below. In a reverse repurchase agreement, the Fund would sell a security and enter into an agreement to repurchase the security at a specified future date and price. The Fund generally retains the right to interest and principal payments on the security. Since the Fund receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing (see "Borrowing"). When required by guidelines of the SEC, the Fund will segregate or earmark permissible liquid assets to secure its obligations to repurchase the security. At the time the Fund enters into a reverse repurchase agreement, it will establish and maintain segregated or earmarked liquid assets with an approved custodian having a value not less than the repurchase price (including accrued interest). The segregated or earmarked liquid assets will be marked-to-market daily and additional assets will be segregated or earmarked on any day in which the assets fall below the repurchase price (plus accrued interest). The Fund's liquidity and ability to manage its assets might be affected when it sets aside cash or portfolio securities to cover such commitments. Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale may decline below the price of the securities the Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund's obligation to repurchase the securities, and the Fund's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such determination. Reverse repurchase agreements are considered to be borrowings under the 1940 Act.
Reverse repurchase agreements may be used as arbitrage transactions in which the Fund will maintain an offsetting position in repurchase agreements that mature on or before the settlement date on the related reverse repurchase agreements. Since the Fund will receive interest on the repurchase agreements in which it invests the transaction proceeds, such transactions may involve leverage. However, since such repurchase agreements will be high quality and will mature on or before the settlement date of the reverse repurchase agreement, the Fund's adviser
believes that such arbitrage transactions do not present the risks to the Fund that are associated with other types of leverage.
TEMPORARY INVESTMENTS
Generally the Fund will be fully invested in accordance with its investment objective and strategies. However, pending investment of cash balances, the Fund may invest without limit in cash or money market cash equivalents, including: (1) short-term U.S. government securities; (2) certificates of deposit, bankers' acceptances, and interest-bearing savings deposits of commercial banks; (3) prime quality commercial paper; (4) repurchase agreements covering any of the securities in which the Fund may invest directly; and (5) subject to regulatory limits, shares of other investment companies that invest in securities in which the Fund may invest. Should this occur, the Fund will not be pursuing its investment objective and may miss potential market upswings.
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions for the Fund which cannot be changed without the vote of the majority of the outstanding shares of the Fund for which a change is proposed. The vote of the majority of the outstanding shares means the vote of (1) 67% or more of the voting securities present at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy or (2) a majority of the outstanding voting securities, whichever is less.
The Fund:
o May not purchase securities of any one issuer, other than obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, if, immediately after such purchase, more than 5% of the Fund's total assets would be invested in such issuer or the Fund would hold more than 10% of the outstanding voting securities of the issuer, except that 25% or less of the Fund's total assets may be invested without regard to such limitations. There is no limit to the percentage of assets that may be invested in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.
o May not lend any security or make any other loan except that the Fund may, in accordance with its investment objective and policies, (i) lend portfolio securities; (ii) purchase and hold debt securities or other debt instruments, including but not limited to loan participations and subparticipations, assignments, and structured securities; (iii) make loans secured by mortgages on real property; (iv) enter into repurchase agreements; and (v) make time deposits with financial institutions and invest in instruments issued by financial institutions, and enter into any other lending arrangement as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not purchase or sell real estate, except that the Fund may (i) acquire real estate through ownership of securities or instruments and sell any real estate acquired thereby, (ii) purchase or sell instruments secured by real estate (including interests therein), and (iii) purchase or sell securities issued by entities or investment vehicles that own or deal in real estate (including interests therein).
o May not borrow money or issue senior securities, except that the Fund may sell securities short, enter into reverse repurchase agreements and may otherwise borrow money and issue senior securities as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder.
o May not purchase or sell commodities or commodities contracts, except to the extent disclosed in the current Prospectus or SAI of the Fund.
o May not act as an underwriter of another issuer's securities, except to the extent that the Fund may be deemed an underwriter within the meaning of the Securities Act in connection with the purchase and sale of portfolio securities.
o May not purchase the securities of any issuer if, as a result, 25% or more (taken at current value) of the Fund's total assets would be invested in the securities of issuers, the principal activities of which are in the same industry; provided, that in replicating the weightings of a particular industry in its target index, the Fund may invest more than 25% of its total assets in securities of issuers in that industry. This limitation does not apply to securities issued by the U.S. government or its agencies or instrumentalities and obligations issued by state, county or municipal governments. The following industries are considered separate industries for purposes of this investment restriction: electric, natural gas distribution, natural gas pipeline, combined electric and natural gas, telephone utilities, captive borrowing conduit, equipment finance, premium finance, leasing finance, consumer finance and other finance.
The following are the NON-FUNDAMENTAL operating policies of the Fund,
which MAY BE CHANGED by the Board of Trustees of the Trust WITHOUT
SHAREHOLDER APPROVAL:
The Fund may not:
o Purchase securities on margin, except that the Fund may use margin to the extent necessary to engage in short sales of securities and to obtain such short-term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with options, futures contracts, options on futures contracts, and transactions in currencies or other derivative instruments shall not constitute purchasing securities on margin.
o Purchase or otherwise acquire any security if, as a result, more than 15% of its net assets would be invested in securities that are illiquid.
If any percentage restriction or requirement described above is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in net asset value will not constitute a violation of such restriction or requirement. However, should a change in net asset value or other external events cause the Fund's investments in illiquid securities including repurchase agreements with maturities in excess of seven days, to exceed the limit set forth above for the Fund's investment in illiquid securities, the Fund will act to cause the aggregate amount of such securities to come within such limit as soon as is reasonably practicable. In such an event, however, the Fund would not be required to liquidate any portfolio securities where the Fund would suffer a loss on the sale of such securities.
The investment objective of the Fund are not fundamental and may be changed by the Board of Trustees without shareholder approval.
INTERNAL REVENUE CODE RESTRICTIONS
In addition to the investment restrictions above, the Fund must be
diversified according to Code requirements. Specifically, at each tax quarter
end, the Fund's holdings must be diversified so that (1) at least 50% of the
market value of its total assets is represented by cash, cash items (including
receivables), U.S. government securities, securities of other U.S. regulated
investment companies, and other securities, limited so that no one issuer has a
value greater than 5% of the value of the Fund's total assets and that the Fund
holds no more than 10% of the outstanding voting securities of such issuer, and
(2) not more than 25% of the value of the Fund's total assets is invested in the
securities (other than those of the U.S. government or other U.S. regulated
investment companies) of any one issuer, or of two or more issuers which the
Fund controls and which are engaged in the same, similar, or related trades or
businesses, or the securities of one or more qualified publicly traded
partnerships.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Fund is calculated by dividing the lesser of purchases or sales of portfolio securities for the year by the monthly average value of the portfolio securities, excluding securities whose maturities at the time of purchase were one year or less. High portfolio turnover rates will generally result in higher
brokerage expenses, and may increase the volatility of the Fund. For the period from September 29, 2006 (commencement of operations) to October 31, 2006, the Fund's portfolio turnover rate was 0%.
DISCLOSURE OF PORTFOLIO HOLDINGS
The Board of Trustees of the Trust has adopted policies and procedures regarding the disclosure of portfolio holdings information to protect the interests of Fund shareholders and to address potential conflicts of interest that could arise between the interests of Fund shareholders and the interests of the Fund's investment advisers, principal underwriter or affiliated persons of the Fund's investment adviser or principal underwriter. The Trust's overall policy with respect to the release of portfolio holdings is to release such information consistent with applicable legal requirements and the fiduciary duties owed to shareholders. Subject to the limited exceptions described below, the Trust will not make available to anyone non-public information with respect to its portfolio holdings until such time as the information is made available to all shareholders or the general public.
The policies and procedures are applicable to the Fund's respective investment adviser and any subadviser to the Fund. Pursuant to the policy, the Fund, its investment adviser, any subadviser, and their agents are obligated to:
o Act in the best interests of Fund shareholders by protecting non-public and potentially material portfolio holdings information;
o Ensure that portfolio holdings information is not provided to a favored group of clients or potential clients; and
o Adopt such safeguards and controls around the release of client information so that no client or group of clients is unfairly disadvantaged as a result of such release.
Portfolio holdings information that is not publicly available will be released selectively only pursuant to the exceptions described below. In most cases, where an exception applies, the release of portfolio holdings is strictly prohibited until the information is at least 15 calendar days old. Nevertheless, the Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate may authorize, where circumstances dictate, the release of more current portfolio holdings information.
The Fund posts onto the Trust's internet site (www.nwdfunds.com) substantially all of its securities holdings as of the end of each month. Such portfolio holdings are available no earlier than 15 calendar days after the end of the previous month, and remain available on the internet site until the Fund files its next quarterly portfolio holdings report on Form N-CSR or Form N-Q with the SEC.The Fund discloses its complete portfolio holdings information to the SEC using Form N-Q within 60 days of the end of the first and third quarter ends of the Fund's fiscal year and on Form N-CSR on the second and fourth quarter ends of the Fund's fiscal year. Form N-Q is not required to be mailed to shareholders, but is made public through the SEC's electronic filings. Shareholders receive either complete portfolio holdings information or summaries of Fund portfolio holdings with their annual and semi-annual reports.
Exceptions to the portfolio holdings release policy described above can only be authorized by the Chief Investment Officer, Chief Administrative Officer or their duly authorized delegate and will be made only when:
o The Fund has a legitimate business purpose for releasing portfolio holdings information in advance of release to all shareholders or the general public;
o The recipient of the information provides written assurances that the non-public portfolio holdings information will remain confidential and that persons with access to the information will be prohibited from trading based on the information; and
o The release of such information would not otherwise violate the antifraud provisions of the federal securities laws or the Fund's fiduciary duties.
Under this policy, the receipt of compensation by the Fund, its investment adviser, a subadviser, or an affiliate as consideration for disclosing non-public portfolio holdings information will not be deemed a legitimate business purpose.
Eligible third parties to whom portfolio holdings information may be released in advance of general release include the following:
o Data consolidators (including ratings agencies);
o Fund rating/ranking services and other data providers; and
o Service providers to the Fund.
The Fund's investment adviser conducts periodic reviews of compliance with the policy and the Fund's Chief Compliance Officer provides annually a report to the Board of Trustees regarding the operation of the policy and any material changes recommended as a result of such review. The investment adviser's compliance staff will also annually submit to the Board a list of exceptions granted to the policy, including an explanation of the legitimate business purpose of the Fund that was served as a result of the exception.
TRUSTEES AND OFFICERS OF THE TRUST
Management Information
TRUSTEES WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) OF THE FUND
(1) (2) (3) (4) (5)
=============================================================================================================
Name, Address, and Year Position(s) Held Principal Occupation(s) Number of Other Directorships
of Birth with Fund and During Past 5 Years Portfolios in Held by Trustee**
Length of Time Fund Complex
Served* Overseen by
Trustee
=============================================================================================================
Charles E. Allen Trustee since Mr. Allen is Chairman, Chief 89 None
July 2000 Executive Officer and
c/o NWD Investment President of Graimark Realty
Management, Inc. Advisors, Inc. (real estate
. development, investment and
1200 River Road, asset management).
Suite 1000,
Conshohocken, PA 19428
1948
=============================================================================================================
Paula H.J. Cholmondeley Trustee since Ms. Cholmondeley was Vice 89 Director of Dentsply
July 2000 President and General International, Inc.
c/o NWD Investment Manager Sappi Fine Paper (dental products),
Management, Inc. North America from April Ultralife Batteries,
1200 River Road, 2000 through December 2003. Inc., Albany
Suite 1000, International Corp.
Conshohocken, PA 19428 (paper industry),
Terex Corporation
1947 (construction
equipment), and
Minerals Technology
Inc. (specialty
chemicals)
=============================================================================================================
C. Brent DeVore*** Trustee since Dr. DeVore is President of 89 None
1990 Otterbein College.
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1940
=============================================================================================================
26
|
=============================================================================================================
Phyllis Kay Dryden Trustee since Ms. Dryden was a partner of 89 None
December 2004 Mitchell Madison, a
c/o NWD Investment management consulting
Management, Inc. company from January 2006
1200 River Road, until December 2006; she is
Suite 1000, currently a consultant with
Conshohocken, PA 19428 the company. Ms. Dryden was
formerly Managing Partner of
1947 marchFIRST, a global
management consulting firm.
=============================================================================================================
Barbara L. Hennigar Trustee since Retired. 89 None
July 2000
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1935
=============================================================================================================
Barbara I. Jacobs Trustee since Ms. Jacobs served as 89 None
December 2004 Chairman of the Board of
c/o NWD Investment Directors of KICAP Network
Management, Inc. Fund, a European (United
1200 River Road, Kingdom) hedge fund, from
Suite 1000, January 2001 to January
Conshohocken, PA 19428 2006. From 1988-2003, Ms.
Jacobs was also a Managing
1950 Director and European
Portfolio Manager of CREF
Investments (Teachers
Insurance and Annuity
Association -- College
Retirement Equities Fund).
=============================================================================================================
27
|
=============================================================================================================
Douglas F. Kridler Trustee since Mr. Kridler has served as 89 None
September 1997 the President and Chief
c/o NWD Investment Executive Officer of the
Management, Inc. Columbus Foundation, (a
1200 River Road, Columbus, OH-based
Suite 1000, foundation which manages
Conshohocken, PA 19428 over 1,300 individual
endowment funds) since
1955 February 2002. Prior to
January 31, 2002, Mr.
Kridler was the President of
the Columbus Association for
the Performing Arts and
Chairman of the Greater
Columbus Convention and
Visitors Bureau.
=============================================================================================================
Michael D. McCarthy Trustee since Retired. Mr. McCarthy was 89 None
December 2004 Chairman of VMAC (Commodity
c/o NWD Investment Swaps) from October 2002
Management, Inc. until January 2007, and a
1200 River Road, partner of Pineville
Suite 1000, Properties LLC (a commercial
Conshohocken, PA 19428 real estate development
firm) from September 2000
1947 until January 2007.
=============================================================================================================
David C. Wetmore Trustee since Retired. 89 None
1995
c/o NWD Investment and Chairman
Management, Inc. since February
1200 River Road, 2005
Suite 1000,
Conshohocken, PA 19428
1948
=============================================================================================================
* Length of time served includes time served with the Trust's predecessors
** Directorships held in (1) any other investment companies registered under
the 1940 Act, (2) any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or (3) any company subject to the requirements of
Section 15(d) of the Exchange Act.
*** Mr. DeVore has served as President of Otterbein College since 1984. Mark
Thresher, President and Chief Operating Officer of Nationwide Financial
Services, Inc. ("NFS") has served as a member of the Board of Trustees of
Otterbein College since 2000, currently serving as one of 30 of its
trustees, and is currently one of two Vice Chairmen of the Board. NFS is
under common control with each of the companies that serves as an
investment adviser or principal underwriter to the Trust, as each is a
majority-owned subsidiary of Nationwide Corporation ("NC") and, through NC,
of Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire
Insurance Company (4.8%).
28
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TRUSTEES WHO ARE INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) AND OFFICERS OF
THE TRUST.
==============================================================================================================
(1) (2) (3) (4) (5)
==============================================================================================================
Name, Address, and Year of Position(s) Principal Occupation(s) During Number of Other Directorships
Birth Held with Past 5 Years Portfolios in Held by Trustee(3)
Fund and Fund Complex
Length of Overseen by
Time Served(1) Trustee
==============================================================================================================
Arden L. Shisler Trustee since Retired; Mr. Shisler is the 89 Director of
February 2000 former President and Chief Nationwide Financial
NWD Investment Management, Executive Officer of KeB Services, Inc. (2)
Inc. Transport, Inc., a trucking
1200 River Road, firm (2000 through 2002). He
Suite 1000, served as a consultant to KeB
Conshohocken, PA 19428 from January 2003 through
December 2004. Since 1992, Mr.
1941 Shisler has also been Chairman
of the Board for Nationwide
Mutual Insurance Company(2).
==============================================================================================================
John H. Grady President and Mr. Grady is President and N/A None
Chief Chief Executive Officer of NWD
NWD Investment Management, Executive Investment Group, the asset
Inc. Officer management operations of
1200 River Road, since Nationwide Mutual Insurance
Suite 1000, December 2006 Company, which includes
Conshohocken, PA 19428 Gartmore Mutual Fund Capital
Trust, (2) Gartmore Morley
Capital Management, Inc.,
(2)NorthPointe Capital LLC,
1961 (2) Gartmore SA Capital Trust,
(2) Gartmore Investor
Services, Inc. (2) and
Gartmore Distribution
Services, Inc. 2 From March
2004 until March 2006, Mr.
Grady was Chief Executive
Officer of Constellation
Investment Management Co., L.P
(registered investment
adviser), and President and
Chief Executive Officer of
Constellation Funds Group
(registered investment
companies). He also was
President of Constellation
Investment Distribution Co.,
Inc. (registered
broker-dealer) from March 2004
until June 2006. From February
2001 until February 2004, Mr.
Grady was Chief Operating and
Chief Legal Officer; Managing
Director, Mutual Funds Group,
Turner Investment Partners,
Inc. (registered investment
adviser); Executive Vice
President of Turner Funds and
Turner Institutional
Portfolios (registered
investment companies); and
President, Turner Investment
Distributors, Inc. (registered
broker-dealer).
==============================================================================================================
29
|
=============================================================================================================
Gerald J. Holland Treasurer Mr. Holland is Senior Vice N/A None
since March President - Operations for NWD
NWD Investment Management, 2001 Investment Management, Inc.
Inc. ("NWD")(2).
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1951
==============================================================================================================
Michael A. Krulikowski Chief Since November 1999, Mr. N/A None
Compliance Krulikowski has served as a
NWD Investment Management, Officer since Vice President and Chief
Inc. June 2004 Compliance Officer of NWD.3
1200 River Road,
Suite 1000,
Conshohocken, PA 19428
1959
==============================================================================================================
Eric E. Miller Secretary Mr. Miller is Senior Vice N/A None
since President, General Counsel,
NWD Investment Management, December 2002 and Assistant Secretary for
Inc. NWD (3) . 1200 River Road
Suite 1000,
Conshohocken, PA 19428
1953
==============================================================================================================
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(1) Length of time served includes time served with the Trust's predecessors.
(2) This position is held with an affiliated person or principal underwriter of the Funds.
(3) Directorships held in: (1) any other investment company registered under the
1940 Act, (2) any company with a class of securities registered pursuant to
Section 12 of the Exchange Act or (3) any company subject to the
requirements of Section 15(d) of the Exchange Act.
RESPONSIBILITIES OF THE BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of its Board of Trustees. The Board of Trustees sets and reviews policies regarding the operation of the Trust, and directs the officers to perform the daily functions of the Trust.
BOARD OF TRUSTEE COMMITTEES
The Board of Trustees has four standing committees: Audit, Valuation and Operations, Nominating and Fund Governance and Performance Committees.
The purposes of the Audit Committee are to: (a) oversee the Trust's
accounting and financial reporting policies and practices, its internal controls
and, as appropriate, the internal controls of certain of its service providers;
(b) oversee the quality and objectivity of the Trust's financial statements and
the independent audit thereof; (c) ascertain the independence of the Trust's
independent auditors; (d) act as a liaison between the Trust's independent
auditors and the Board; (e) approve the engagement of the Trust's independent
auditors to (i) render audit and non-audit services for the Trust and (ii)
render non-audit services for the Trust's investment advisers (other than a
subadviser whose role is primarily portfolio management and is overseen by
another investment adviser) and certain other entities under common control with
one of the Trust's investment advisers if the engagement relates to the Trust's
operations and financial reporting; (f) meet and consider the reports of the
Trust's independent auditors; (g) review and make recommendations to the Board
regarding the Code of Ethics of the Trust and that of all Trust advisers,
subadvisers, and principal underwriters and annually review changes to,
violations of, and certifications with respect to such Code of Ethics; and (h)
oversee the Trust's written policies and procedures adopted under Rule 38a-1 of
the 1940 Act and oversee the appointment and performance of the Trust's
designated Chief Compliance Officer. The function of the Audit Committee is
oversight; it is management's responsibility to maintain appropriate systems for
accounting and internal control, and the independent auditors' responsibility to
plan and carry out a proper audit. The independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of the
Trust's shareholders. Each of the members have a working knowledge of basic
finance and accounting matters and are not interested persons of the Trust, as
defined in the 1940 Act. This Committee met six times during the past fiscal
year and currently consists of the following Trustees: Mr. Allen, Ms.
Cholmondeley (Chairperson), Ms. Jacobs and Mr. Wetmore.
The purposes of the Valuation and Operations Committee are to (a) oversee the implementation and operation of the Trust's Valuation Procedures, applicable to all of the Trust's portfolio securities; (b) oversee the implementation and operation of the Trust's Rule 2a-7 Procedures, applicable to the Trust's money market fund series; (c) oversee the principal underwriter with respect to the distribution of the Trust's shares, including oversight of the Trust's 12b-1 plans and administrative services plans; and (d) oversee the Trust's portfolio brokerage practices. The Valuation and Operations Committee met five times during the past fiscal year and currently consists of the following Trustees: Mr. DeVore, Ms. Dryden, Ms. Hennigar, Mr. Kridler (Chairman), and Mr. McCarthy, each of whom is not an interested person of The Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has the following powers and responsibilities: (1) selection and nomination of all persons for election or appointment as Trustees of the Trust (provided that nominees for independent Trustee are recommended for selection and approval by all of the incumbent independent Trustees then serving on the Board); (2) periodic review of the composition of the Board to determine whether it may be appropriate to add individuals with specific backgrounds, diversity or skill sets; (3) periodic review of Board governance procedures (including the Board's effectiveness, Trustee retirement, Trustee investment in the Funds and the process by which the Trust's principal service providers are evaluated); (4) review of completed Trustee and Officer Questionnaires and adjust composition of Board by recommending the removal, replacement, or retirement of an incumbent Trustee and may recommend the selection and nomination of an appropriate candidate; (5) oversee the implementation of the Board's policies regarding evaluations of the Board and Trustee peer evaluations; (6) review and make recommendations to the Board regarding the Proxy Voting Guidelines, Policies and Procedures of all Trust advisers and subadvisers; (7) periodic review of Trustee compensation and recommend appropriate changes to the Independent Trustees; (8) oversee implementation of the Trust's Policy Regarding the Service by Trustees on the Boards of Directors of Public Companies and Unaffiliated Fund Companies; (9) annual review and make recommendations to the Board regarding the Board's Statements of Policies Regarding the Enhanced Fund Governance and Oversight By, the Enhanced Independence of, & the Enhanced Effectiveness of the Board of Trustees; and (10) monitoring of the performance of legal counsel employed by the independent Trustees,
supervision of counsel for the independent Trustees and monitoring of the performance of legal counsel to the Trust, in consultation with the Trust's management. The Nominating and Fund Governance Committee reports to the full Board with recommendations of any appropriate changes to the Board. This Committee met seven times during the past fiscal year and currently consists of the following Trustees: Mr. DeVore (Chairman), Ms. Cholmondeley, Ms. Dryden, Mr. Kridler, and Mr. Wetmore, each of whom is not an interested person of the Trust, as defined in the 1940 Act.
The Nominating and Fund Governance Committee has adopted procedures regarding its review of recommendations for trustee nominees, including those recommendations presented by shareholders. When considering whether to add additional or substitute Trustees to the Board of Trustees of the Trust, the Trustees shall take into account any proposals for candidates that are properly submitted to the Trust's Secretary. Shareholders wishing to present one or more candidates for Trustee for consideration may do so by submitting a signed written request to the Trust's Secretary at Attn: Secretary, Gartmore Mutual Funds, 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, which includes the following information: (i) name and address of shareholder and, if applicable, name of broker or record holder; (ii) number of shares owned; (iii) name of Fund(s) in which shares are owned; (iv) whether the proposed candidate(s) consent to being identified in any proxy statement utilized in connection with the election of Trustees; (v) the name and background information of the proposed candidates and (vi) a representation that the candidate or candidates are willing to provide additional information about themselves, including assurances as to their independence.
The functions of the Performance Committee are: (1) in consultation with
management of the Trust, to review the kind, scope and format of, and the time
periods covered by, the investment performance data and related reports provided
to the Board and, if the Committee determines that changes to such data or
reports would be appropriate and practicable, the Committee will work with
management of the Trust to implement any such changes; (2) in consultation with
management of the Trust, to review the investment performance benchmarks and
peer groups used in reports delivered to the Board for comparison of investment
performance of the Funds and, if the Committee determines that changes to such
benchmarks or peer groups would be appropriate, the Committee will work with
management to implement any such change; (3) in consultation with management of
the Trust, to review such other matters that affect performance, including for
example, fee structures, expense ratios, as the Committee deems to be necessary
and appropriate and work with management to implement any recommended changes;
(4) to review and monitor the performance of the Trust's funds and the fund
family, as a whole, in the manner and to the extent directed by the Board of
Trustees, recognizing that the ultimate oversight of fund performance shall
remain with the full Board of Trustees; (5) to review and monitor the structure
of, and the method used to determine, the compensation of each portfolio manager
of the Trust's funds with respect to management of the Trust's fund and any
other account managed by the portfolio manager; and (6) to review and monitor
material conflicts of interest that may arise from a portfolio manager's
management of multiple accounts.. This Committee met four times during the past
fiscal year and currently consists of the following Trustees: Ms. Hennigar
(Chairperson), Mr. Allen, Ms. Jacobs, Mr. McCarthy, and Mr. Shisler.
OWNERSHIP OF SHARES OF GARTMORE MUTUAL FUNDS AS OF DECEMBER 31, 2006
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES AND/OR SHARES IN ALL
REGISTERED INVESTMENT COMPANIES
DOLLAR RANGE OF EQUITY SECURITIES OVERSEEN BY TRUSTEE IN FAMILY OF
NAME OF TRUSTEE AND/OR SHARES IN THE FUND INVESTMENT COMPANIES
Charles E. Allen None $10,001-$50,000
Paula H.J. Cholmondeley None $50,001-$100,000
C. Brent DeVore None Over $100,000
Phyllis Kay Dryden None $10,001-$50,000
Barbara L. Hennigar None $10,001-$50,000
Barbara I. Jacobs None $50,001-$100,000
Douglas F. Kridler None $10,001-$50,000
Michael D. McCarthy None Over $100,000
David C. Wetmore None Over $100,000
Arden L. Shisler None Over $100,000
|
OWNERSHIP IN THE TRUST'S INVESTMENT ADVISERS(1), SUBADVISERS(2) OR DISTRIBUTOR(3)
AS OF DECEMBER 31, 2006
TRUSTEES WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) OF THE FUND
NAME OF
OWNERS AND
RELATIONSHIPS NAME OF TITLE OF CLASS OF VALUE OF
NAME OF TRUSTEE TO TRUSTEE COMPANY SECURITY SECURITIES PERCENT OF CLASS
Charles E. Allen N/A N/A N/A None N/A
Paula H.J. N/A N/A N/A None N/A
Cholmondeley C. Brent DeVore N/A N/A N/A None N/A
Phyllis Kay Dryden N/A N/A N/A None N/A
Barbara L. Hennigar N/A N/A N/A None N/A
Barbara I. Jacobs N/A N/A N/A None N/A
Douglas F. Kridler N/A N/A N/A None N/A
Michael D. McCarthy N/A N/A N/A None N/A
David C. Wetmore N/A N/A N/A None N/A
|
(1) Investment advisers for all of the Trust's funds include Gartmore Mutual Fund Capital Trust and Gartmore Morley Capital Management, Inc.
(2) Subadvisers for other funds not in this SAI include Gartmore Global Partners, NorthPointe Capital, LLC, and BlackRock Investment Management, LLC (formerly known as Fund Asset Management, L.P.).
(3) Gartmore Distribution Services, Inc., or any company, other than an investment company, that controls the Fund's adviser or distributor.
COMPENSATION OF TRUSTEES
The Trustees receive fees and reimbursement for expenses of attending board meetings from the Trust. Gartmore Mutual Fund Capital Trust, the adviser to various series of the Trust based upon a pro rata share for the funds for which it acts as investment adviser, reimburses the Trust for fees and expenses paid to Trustees who are interested persons of the Trust and who are employees of an adviser or its affiliates. The Compensation Table below sets forth the total compensation paid to the Trustees of the Trust, before reimbursement, for the fiscal year ended October 31, 2006. In addition, the table sets forth the total compensation to be paid to the Trustees from all the Fund Complex for the fiscal year ended October 31, 2006. Trust officers receive no compensation from the Trust in their capacity as officers.
The Trust does not maintain any pension or retirement plans for the Officers or Trustees of the Trust.
PENSION
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL TOTAL
COMPENSATION AS PART OF TRUST BENEFITS UPON COMPENSATION FOR
NAME OF TRUSTEE FROM THE TRUST EXPENSES RETIREMENT THE COMPLEX(1)
Charles E. Allen $ 65,375 $ 0 $ 0 $ 131,000
Paula H.J. Cholmondeley 62,875 0 0 126,000
C. Brent DeVore 57,125 0 0 114,250
Phyllis Kay Dryden 64,000 0 0 128,000
Barbara L. Hennigar 57,125 0 0 114,250
Barbara I. Jacobs 67,375 0 0 133,750
Douglas F. Kridler 56,125 0 0 112,250
Michael D. McCarthy 52,625 0 0 106,250
Arden L. Shisler 46,750 0 0 93,500
David Wetmore 86,125 0 0 172,500
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(1) On October 31, 2006, the Fund Complex included two trusts comprised of 89 investment company funds or series.
Code of Ethics
Federal law requires the Trust, each of its investment advisers, subadvisers, and principal underwriter to adopt codes of ethics which govern the personal securities transactions of their respective personnel. Accordingly, each such entity has adopted a code of ethics pursuant to which their respective personnel may invest securities for their personal accounts (including securities that may be purchased or held by the Trust).Copies of these Codes of Ethics are on file with the SEC and are available to the public.
INVESTMENT ADVISORY AND OTHER SERVICES
Trust Expenses
The Trust pays the compensation of the Trustees who are not employees of NWD Investment Management, Inc. ("NWDIMI") or its affiliates, and all expenses (other than those assumed by the Adviser), including governmental fees, interest charges, taxes, membership dues in the Investment Company Institute allocable to the Trust; investment advisory fees and any Rule 12b-1 fees; fees under the Trust's Fund Administration Agreement which includes the expenses of calculating the Fund's net asset values; fees and expenses of independent certified public accountants, legal counsel, and any transfer agent, registrar, and dividend disbursing agent of the Trust; expenses of preparing, printing, and mailing shareholders reports, notices, proxy statements, and reports to governmental offices and commissions; expenses connected with the execution, recording, and settlement of portfolio security transactions; insurance premiums; fees and expenses of the custodian for all services to the Trust; expenses of calculating the net asset value of shares of the Trust; expenses of shareholders meetings; and expenses relating to the issuance, registration, and qualification of shares of the Trust. Gartmore Mutual Fund Capital Trust ("GMFCT" or "Adviser") may, from time to time, agree to voluntarily or contractually waive advisory fees, and if necessary reimburse expenses, in order to limit total operating expenses for the Fund and/or classes, as described below. These expense limitations apply to the classes described; if a particular class is not referenced, there is no expense limitation for that class.
INVESTMENT ADVISER
Under an Investment Advisory Agreement with the Trust, GMFCT manages the Fund in accordance with the policies and procedures established by the Trustees. GMFCT manages the day-to day investments of the Fund. GMFCT pays the compensation of the officers of the Trust employed by GMFCT and pays a pro rata portion of the compensation and expenses of the Trustees who are employed by NWDIMI and its affiliates. GMFCT also furnishes, at its own expense, all necessary administrative services, office space, equipment, and clerical personnel for servicing the investments of the Trust and maintaining its investment advisory facilities, and executive and
supervisory personnel for managing the investments and effecting the portfolio transactions of the Trust. In addition, GMFCT pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other financial institutions in exchange for their selling of shares of the Trust's series or for recordkeeping or other shareholder related services.
The Investment Advisory Agreement also specifically provides that GMFCT, including its directors, officers, and employees, shall not be liable for any error of judgment, or mistake of law, any loss arising out of any investment, or any act or omission in the execution and management of the Trust, except for willful misfeasance, bad faith, or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties under the Agreement. The Agreement continues in effect for an initial period of one year and thereafter shall continue automatically for successive annual periods provided such continuance is specifically approved at least annually by the Trustees, or by vote of a majority of the outstanding voting securities of the Trust, and, in either case, by a majority of the Trustees who are not parties to the Agreement or interested persons of any such party. The Agreement terminates automatically in the event of its "assignment," as defined under the 1940 Act. It may be terminated as to the Fund without penalty by vote of a majority of the outstanding voting securities of the Fund, or by either party, on not less than 60 days written notice. The Agreement further provides that GMFCT may render similar services to others.
GMFCT, located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428, is a wholly-owned subsidiary of NWDIMI, a holding company which is an indirect, wholly-owned subsidiary of NWD Management & Research Trust ("NWD MRT"), also located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428. NWD MRT, which is a registered investment adviser, is a wholly-owned subsidiary of Nationwide Corporation. All of the common stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders.
On February 2, 2007, Nationwide Corp. entered into a purchase agreement ("Purchase Agreement") with Nationwide Financial Services, Inc. ("NFS"), under which NFS will purchase GMFCT (and certain related entities) from Nationwide Corp. NFS is a majority-owned subsidiary of Nationwide Corp. and is thus already affiliated with GMFCT. The purchase of GMFCT by NFS may be deemed to constitute a change of control, terminating GMFCT's existing investment advisory agreements with the Trust. The Board of Trustees of the Trust has approved new investment advisory agreements with GMFCT with respect to each series of the Trust ("Funds") identified below, which are identical to the existing investment advisory agreements in all material respects. The new investment advisory agreements with GMFCT are subject to the approval of the Funds' respective shareholders. The sale of GMFCT to NFS currently is anticipated to close during the second quarter of 2007.
As of September 29, 2006, Gartmore Funds and its US operations, as well as the Funds' advisers, distributor, and other service providers, are no longer affiliated with Gartmore Investment Management plc (Gartmore UK) or other Gartmore international businesses. Certain Gartmore US companies, and marketing materials related to them, will continue to carry the Gartmore name for a limited duration under the terms of an agreement with Gartmore UK.
For services provided under the Investment Advisory Agreement, GMFCT receives an annual fee of 1.25% paid monthly based on average daily net assets of the Fund.
Limitation of Fund Expenses
Gartmore Mutual Fund Capital Trust
In the interest of limiting the expenses of the Fund, GMFCT may from time to time waive some or all of its investment advisory fee or reimburse other fees for the Fund. In this regard, GMFCT has entered into an expense limitation agreement with the Trust on behalf of the Fund (the "Expense Limitation Agreement"). Pursuant to the Expense Limitation Agreement, GMFCT has agreed to waive or limit its fees and to assume other expenses to the extent necessary to limit the total annual operating expenses of each Class of the Fund to the limits described below. This limit excludes certain Fund expenses, including any taxes, interest, brokerage fees, Rule 12b-1 fees, short sale
dividend expenses, administrative services fees, other expenses which are capitalized in accordance with generally accepted accounting principles, expenses incurred by the Fund in connection with any merger or reorganization and may exclude other non-routine expenses not incurred in the ordinary course of the Fund's business. Please note that the waiver of such fees will cause the total return and yield of a Fund to be higher than they would otherwise be in the absence of such a waiver.
GMFCT may request and receive reimbursement from the Fund for the advisory
fees waived or limited and other expenses reimbursed by the Adviser pursuant to
the Expense Limitation Agreements at a later date when the Fund has reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual operating expense ratio of the Fund to exceed the limits in the
Expense Limitation Agreement. No reimbursement will be made by the Fund unless:
(i) the Fund's assets exceed $100 million; (ii) the total annual expense ratio
of the Class making such reimbursement is less than the limit set forth below;
(iii) the payment of such reimbursement is approved by the Board of Trustees on
a quarterly basis; and (iv) the payment of such reimbursement is made no more
than three years from the fiscal year in which the corresponding reimbursement
to the Fund was made. Except as provided for in the Expense Limitation
Agreement, reimbursement of amounts previously waived or assumed by the Adviser
is not permitted.
Until at least February 28, 2008, GMFCT has agreed contractually to waive advisory fees and, if necessary, reimburse expenses in order to limit total annual fund operating expenses to 1.65% of all share classes of the Fund, excluding any taxes, interest, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, short-sale dividend expenses, Rule 12b-1 fees, fees paid pursuant to the Administrative Services Plan, and other expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary expenses.
Investment Advisory Fees
For the period from September 29, 2006 (commencement of operations) to October 31, 2006, the Fund paid GMFCT $5,725 for investment advisory services and GMFCT waived fees and reimbursed expenses in the amount of $4363.
*The Fund had not commenced operations until September 29, 2006.
Multi-Manager Structure
The Adviser and the Trust have received from the SEC an exemptive order for a multi-manager structure which allows the Adviser to hire, replace or terminate subadvisers without the approval of shareholders; the order also allows the Adviser to revise a subadvisory agreement without shareholder approval. If a subadviser is hired, the change will be communicated to shareholders within 90 days of such change, and the change will be approved by the Trust's Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust or the Adviser. The order is intended to facilitate the efficient operation of the Fund and afford the Trust increased management flexibility.
The Adviser provides investment management evaluation services to the Fund principally by performing initial due diligence on prospective subadvisers for the Fund and thereafter monitoring the performance of the subadviser through quantitative and qualitative analysis as well as periodic in-person, telephonic and written consultations with the subadviser. The Adviser has responsibility for communicating performance expectations and evaluations to any subadviser and ultimately recommending to the Trust's Board of Trustees whether the subadviser's contract should be renewed, modified or terminated; however, the Adviser does not expect to recommend frequent changes of subadvisers. The Adviser will regularly provide written reports to the Trust's Board of Trustees regarding the results of their evaluation and monitoring functions. Although the Adviser will monitor the performance of the subadvisers, there is no certainty that the subadvisers or the Fund will obtain favorable results at any given time.
PORTFOLIO MANAGERS
Appendix C contains the following information regarding the portfolio manager identified in the Fund's Prospectus: (i) the dollar range of the portfolio manager's investments in the Fund; (ii) a description of the portfolio
manager's compensation structure; and (iii) information regarding other accounts managed by the portfolio manager and potential conflicts of interest that might arise from the management of multiple accounts.
DISTRIBUTOR
Gartmore Distribution Services, Inc. ("GDSI" or the "Distributor") serves as underwriter for the Fund in the continuous distribution of its shares pursuant to an Underwriting Agreement amended as of February 28, 2007 (the "Underwriting Agreement"). Unless otherwise terminated, the Underwriting Agreement will continue for an initial period of two years and from year to year thereafter for successive annual periods, if, as to the Fund, such continuance is approved at least annually by (i) the Trust's Board of Trustees or by the vote of a majority of the outstanding shares of the Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to the Underwriting Agreement or interested persons (as defined in the 1940 Act) of any party to the Underwriting Agreement, cast in person at a meeting called for the purpose of voting on such approval. The Underwriting Agreement may be terminated in the event of any assignment, as defined in the 1940 Act. GDSI is a wholly-owned subsidiary of Nationwide Asset Management, Inc. ("NAMI"), a Delaware holding company. NAMI is a wholly-owned subsidiary of Gartmore SA Capital Trust, which is an investment adviser and is wholly-owned by NWDIMI, a Delaware holding company. NWDIMI is a wholly owned, indirect subsidiary of NWD MRT. The following entities or people are affiliates of the Trust and are also affiliates of GDSI:
GMFCT
NWD MRT
Gartmore SA Capital Trust
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
Nationwide Corporation
Nationwide Mutual Insurance Company
John H. Grady
Michael A. Krulikowski
Gerald J. Holland
Eric E. Miller
In its capacity as Distributor, GDSI solicits orders for the sale of Shares, advertises and pays the costs of distribution, advertising, office space and the personnel involved in such activities. GDSI receives no compensation under the Underwriting Agreement with the Trust, but may retain all or a portion of the sales charge and 12b-1 fee, if any, imposed upon sales of the Fund's shares.
For the period from September 29, 2006 (commencement of operations) to October 31, 2006, GDSI received commissions of $0 from the sale of shares of the Fund.
GDSI also receives the proceeds of contingent deferred sales charges imposed on certain redemptions of Class B, Class C, and certain Class A shares. For the period from September 29, 2006 (commencement of operations) to October 31, 2006, GDSI received $0 from such sales charges.
Distribution Plan
The Trust, with respect to shares of the Fund, has adopted a Distribution Plan (the "Plan") under Rule 12b-1 of the 1940 Act. The Plan permits the Fund to compensate GDSI, as the Fund's principal underwriter, for expenses associated with the distribution of the Fund's Class A, Class B, Class C, or Class R shares, as applicable. Although actual distribution expenses may be more or less, the Fund, or the applicable class, as indicated below, pay GDSI an annual fee under the Plan, regardless of expenses, in annual amount that will not exceed the following amounts:
AMOUNT
0.25% of the average daily net assets of the Fund's Class A shares (distribution or services fee).
1.00% of the average daily net assets of the Fund's Class B shares (0.25% services fee).
1.00% of the average daily net assets of the Fund's Class C shares (0.25% services fee).
0.50% of the average daily net assets of the Fund's Class R shares (0.25% of which may be either a distribution or services fee).
As required by Rule 12b-1, the Plan was approved by the Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan (the "Independent Trustees"). The Plan was initially approved by the Board of Trustees on March 5, 1998. The Plan may be amended from time to time by vote of a majority of the Trustees, including a majority of the Independent Trustees, cast in person at a meeting called for that purpose. The Plan may be terminated as to the applicable shares of the Fund by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding shares of that Class or Fund, as applicable. Any change in the Plan that would materially increase the distribution cost to the applicable shareholders requires shareholder approval. The Trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. For so long as the Plan is in effect, selection and nomination of those Trustees who are not interested persons of the Trust shall be committed to the discretion of such disinterested persons. All agreements with any person relating to the implementation of the Plan may be terminated at any time on 60 days' written notice without payment of any penalty, by vote of a majority of the Independent Trustees or by a vote of the majority of the outstanding applicable shares. The Plan will continue in effect for successive one-year periods, provided that each such continuance is specifically approved (i) by the vote of a majority of the Independent Trustees, and (ii) by a vote of a majority of the entire Board of Trustees cast in person at a meeting called for that purpose. The Board of Trustees has a duty to request and evaluate such information as may be reasonably necessary for them to make an informed determination of whether the Plan should be implemented or continued. In addition the Trustees in approving the Plan as to the Fund must determine that there is a reasonable likelihood that the Plan will benefit the Fund and its Shareholders.
The Board of Trustees of the Trust believes that the Plan is in the best interests of the Fund since it encourages Fund growth and maintenance of Fund assets. As the Fund grows in size, certain expenses, and therefore total expenses per share, may be reduced and overall performance per share may be improved.
GDSI has entered into, and will enter into from time to time, Agreements with selected dealers pursuant to which such dealers will provide certain services in connection with the distribution of the Fund's shares including, but not limited to, those discussed above. GDSI or an affiliate of GDSI pays additional amounts from its own resources to dealers or other financial intermediaries, including its affiliate, NFS or its Subsidiaries for aid in distribution or for aid in providing administrative services to shareholders.
For the period from September 29, 2006 (commencement of operations) to October 31, 2006, GDSI earned the distribution fees under the Plan as shown in the following table.
-------------------------------------------------------------------------------- Fund Class A Class B Class C Class R -------------------------------------------------------------------------------- Gartmore Hedged Core Equity Fund $0 $1 $1 $0 -------------------------------------------------------------------------------- |
The Trust has been informed by GDSI that for the period from September 29, 2006 (commencement of operations) to October 31, 2006, during the fiscal year ended October 31, 2006, the following expenditures were made using the 12b-1 fees received by GDSI with respect to the Fund:
--------------------------------------------------------------------------------------------------------------------
Financing
Distributor Charges with Broker-Dealer
Prospectus Printing Compensation & respect to B & C Compensation &
Fund & Mailing(1) Costs shares Costs
--------------------------------------------------------------------------------------------------------------------
Gartmore Hedged Core Equity Fund $0.28 $0 $1.72 $0
--------------------------------------------------------------------------------------------------------------------
|
(1) Printing and mailing of prospectuses to other than current Fund shareholders.
Fund Administration and Transfer Agency Services
Under the terms of the Fund Administration and Transfer Agency Agreement, Gartmore SA Capital Trust ("GSA"), a wholly-owned subsidiary of NWDIMI, provides various administrative and accounting services, including daily valuation of the Fund's shares, preparation of financial statements, tax returns, and regulatory reports, and presentation of quarterly reports to the Board of Trustees. NWDIMI is a wholly-owned, indirect subsidiary of NWD MRT. Gartmore Investors Services Inc. ("GISI"), an indirect subsidiary of GSA, serves as transfer agent and dividend disbursing agent for the Fund. Both GSA and GISI are located at 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428. For the fund administration and transfer agency services, the Fund pays GSA and GISI a combined annual fee based on the Trust's average daily net assets according to the following schedule:
AGGREGATE TRUST FEE
AS A PERCENTAGE OF NET
ASSET LEVEL ASSETS
----------- ------
$0 up to $1 billion 0.26%
$1 billion up to $3 billion 0.19%
$3 billion up to $4 billion 0.15%
$4 billion up to $5 billion 0.08%
$5 billion up to $10 billion 0.05%
$10 billion up to $12 billion 0.03%
$12 billion and more 0.02%
|
For the period from September 29, 2006 (commencement of operations) to October 31, 2006, October 31, 2006, GSA and GISI were paid combined fund administration and transfer agency fees of $706 from the Fund.
Sub-Administration
GSA and GISI have entered into a Services Agreement with BISYS Fund Services Ohio, Inc. ("BISYS"), effective November 1, 2001, to provide certain fund administration and transfer agency services for the Fund. For these services, GSA pays BISYS an annual fee at the following rates based on the average daily net assets of the aggregate of all the funds of the Trust that BISYS is providing such services for:
AGGREGATE TRUST FEE
AS A PERCENTAGE OF NET
ASSET LEVEL ASSETS
----------- ------
$0 up to $1 billion 0.20%
$1 billion up to $3 billion 0.15%
$3 billion up to $4 billion 0.10%
$4 billion up to $5 billion 0.05%
$5 billion up to $10 billion 0.02%
$10 billion up to $12 billion 0.01%
$12 billion and more 0.005%
|
For the fiscal year ended October 31, 2006, BISYS received $7,776,120 for the sub-administration services and sub-transfer agency services it provided to the Trust.
Administrative Services Plan
Under the terms of an Administrative Services Plan, the Trust is permitted to enter into Servicing Agreements with servicing organizations, such as broker-dealers and financial institutions, who agree to provide certain administrative support services in connection with the Class A, Class R, and Institutional Service Class shares of the Fund. Such administrative support services include, but are not limited to, the following: establishing and maintaining shareholder accounts, processing purchase and redemption transactions, arranging for bank wires, performing shareholder sub-accounting, answering inquiries regarding the Fund, providing periodic statements, showing the account balance for beneficial owners or for plan participants or contract holders of insurance company separate accounts, transmitting proxy statements, periodic reports, updated prospectuses and other communications to shareholders and, with respect to meetings of shareholders, collecting, tabulating and forwarding to the Trust executed proxies and obtaining such other information and performing such other services as may reasonably be required. With respect to the Class R shares, these types of administrative support services will be exclusively provided for retirement plans and their plan participants.
As authorized by the Administrative Services Plan for the Fund, the Trust has entered into a Servicing Agreement for the Fund pursuant to which NFS has agreed to provide certain administrative support services in connection with the applicable Fund shares held beneficially by its customers. NFS is a majority owned subsidiary of Nationwide Corporation, which also owns NWD MRT. In consideration for providing administrative support services, NFS and other entities with which the Trust may enter into Servicing Agreements (which may include GDSI) will receive a fee, computed at the annual rate of up to 0.25% of the average daily net assets of the Class A, Class R and Institutional Service Class shares of the Fund, respectively.
Custodian
JPMorgan Chase Bank, 4 New York Plaza, New York, New York 10008, is the Custodian for the Trust and makes all receipts and disbursements under a Custodian Agreement.
Legal Counsel
Stradley Ronon Stevens & Young, LLP, 2600 One Commerce Square, Philadelphia, Pennsylvania 19103, serves as the Trust's legal counsel.
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP, Two Commerce Square, Suite 1700, 2001 Market Street, Philadelphia, Pennsylvania 19103-7042, serves as the Independent Registered Public Accounting Firm for the Trust.
Brokerage Allocations
GMFCT (or a subadviser) is responsible for decisions to buy and sell securities and other investments for the Fund, the selection of brokers and dealers to effect the transactions and the negotiation of brokerage commissions, if any. In transactions on stock and commodity exchanges in the United States, these commissions are negotiated, whereas on foreign stock and commodity exchanges these commissions are generally fixed and are generally higher than brokerage commissions in the United States. In the case of securities traded on the over-the-counter markets or for securities traded on a principal basis, there is generally no commission, but the price includes a spread between the dealer's purchase and sale price. This spread is the dealer's profit. In underwritten offerings, the price includes a disclosed, fixed commission or discount. Most short-term obligations are normally traded on a "principal" rather than agency basis. This may be done through a dealer (e.g., a securities firm or bank) who buys or sells for its own account rather than as an agent for another client, or directly with the issuer.
Except as described below, the primary consideration in portfolio security transactions is best price and execution of the transaction (i.e., execution at the most favorable prices and in the most effective manner possible). "Best price-best execution" encompasses many factors affecting the overall benefit obtained by the client account in the transaction including, but not necessarily limited to, the price paid or received for a security; the commission charged; the promptness, availability and reliability of execution; the confidentiality and placement accorded the order; and customer service. Therefore, "best price-best execution" does not necessarily mean obtaining the best price alone but is evaluated in the context of all the execution services provided. GMFCT has complete freedom as to the markets in and the broker-dealers through which it seeks this result.
Subject to the primary consideration of seeking best price-best execution and as discussed below, securities may be bought or sold through broker-dealers who have furnished statistical, research, and other information or services to the Adviser. In placing orders with such broker-dealers, the Adviser will, where possible, take into account the comparative usefulness of such information. Such information is useful to the Adviser even though its dollar value may be indeterminable, and its receipt or availability generally does not reduce the Adviser's normal research activities or expenses.
There may be occasions when portfolio transactions for the Fund are executed as part of concurrent authorizations to purchase or sell the same security for trusts or other accounts (including other mutual funds) served by the Adviser or by an affiliated company thereof. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to the Fund, they are affected only when the Adviser believes that to do so is in the interest of the Fund. When such concurrent authorizations occur, the executions will be allocated in an equitable manner.
In purchasing and selling investments for the Fund, it is the policy of the Adviser to obtain best execution at the most favorable prices through responsible broker-dealers. The determination of what may constitute best execution in a securities transaction by a broker involves a number of considerations, including the overall direct net economic result to the Fund (involving both price paid or received and any commissions and other costs paid), the efficiency with which the transaction is effected, the ability to effect the transaction at all when a large block is involved, the availability of the broker to stand ready to execute possibly difficult transactions in the future, the professionalism of the broker, and the financial strength and stability of the broker. These considerations are judgmental and are weighed by the Adviser in determining the overall reasonableness of securities executions and commissions paid. In selecting broker-dealers, the Adviser will consider various relevant factors, including, but not limited to, the size and type of the transaction; the nature and character of the markets for the security or asset to be purchased or sold; the execution efficiency, settlement capability, and financial condition of the broker-dealer's firm; the broker-dealer's execution services, rendered on a continuing basis; and the reasonableness of any commissions.
The Adviser may cause the Fund to pay a broker-dealer who furnishes brokerage and/or research services a commission that is in excess of the commission another broker-dealer would have received for executing the transaction if it is determined, pursuant to the requirements of Section 28(e) of the Securities Exchange Act of 1934, that such commission is reasonable in relation to the value of the brokerage and/or research services provided. Such research services may include, among other things, analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, analytic or modeling software, market data feeds and historical market information. Any such research and other information provided by brokers to the Adviser are considered to be in addition to and not in lieu of services required to be performed by it under its investment advisory agreement. The fees paid to the Adviser pursuant to its investment advisory agreement are not reduced by reason of its receiving any brokerage and research services. The research services provided by broker-dealers can be useful to the Adviser in serving their other clients. All research services received from the brokers to whom commission are paid are used collectively, meaning such services may not actually be utilized in connection with each client account that may have provided the commission paid to the brokers providing such services. The Adviser is prohibited from considering the broker-dealers sale of shares of the Fund, except as may be specifically permitted by law.
Fund portfolio transactions may be effected with broker-dealers who have assisted investors in the purchase of variable annuity contracts or variable insurance policies issued by Nationwide Life Insurance Company or Nationwide Life & Annuity Insurance Company. However, neither such assistance nor sale of other investment
company shares is a qualifying or disqualifying factor in a broker-dealer's selection, nor is the selection of any broker-dealer based on the volume of shares sold.
For the fiscal year ended October 31, 2006, the clients (including the Fund) of all the affiliated advisers of NWDIMI, including but not limited to GMFCT, paid soft dollar commissions in the total amount of $1.9 million with respect to the Trust and $7.1 million with respect to all the clients of all the affiliated advisers of NWDIMI. NWDIMI directs security transactions to brokers providing brokerage and research services to the benefit of all NWDIMI clients, including the Fund.
For the period from September 29, 2006 (commencement of operations) to October 31, 2006, the following brokerage commissions were paid by the Fund:
--------------------------------------------------------------- ----------------- Gartmore Hedged Core Equity Fund 3,478 --------------------------------------------------------------- ----------------- |
As of October 31, 2006, the Fund held investments in securities of their regular broker-dealers as follows:
Approximate Aggregate Value
of Issuer's
ecurities Owned by the Fund
Securities as of
fiscal year end Name of
Fund October 31, 2006 Broker or Dealer
---- ---------------------------- -----------------
Gartmore Hedged Core Equity Fund 69,237 Prudential Financial, Inc.
124,586 CS First Boston Corp.
130,416 Citigroup
90,136 JP Morgan Chase & Co., Inc.
61,050 Wachovia Corp.
86,192 Bank of America Corp.
|
Under the 1940 Act, "affiliated persons" of the Fund are prohibited from dealing with it as a principal in the purchase and sale of securities unless an exemptive order allowing such transactions is obtained from the SEC. However, the Fund may purchase securities from underwriting syndicates of which an affiliate, as defined in the 1940 Act, is a member under certain conditions, in accordance with Rule 10f-3 under the 1940 Act.
The Fund contemplates that, consistent with the policy of obtaining best
results, brokerage transactions may be conducted through "affiliated
broker/dealers," as defined in the 1940 Act. Under the 1940 Act, commissions
paid by the Fund to an "affiliated broker/dealer" in connection with a purchase
or sale of securities offered on a securities exchange may not exceed the usual
and customary broker's commission. Accordingly, it is the Fund's policy that the
commissions to be paid to an affiliated broker-dealer must, in its judgment, be
(1) at least as favorable as those that would be charged by other brokers having
comparable execution capability and (2) at least as favorable as commissions
contemporaneously charged by such broker/dealer on comparable transactions for
its most favored unaffiliated customers, except for accounts for which the
affiliated broker/dealer acts as a clearing broker for another brokerage firm
and customers of an affiliated broker/dealer considered by a majority of the
independent trustees not to be comparable to the Fund. The Fund does not deem it
practicable and in its best interests to solicit competitive bids for
commissions on each transaction. However, consideration regularly is given to
information concerning the prevailing level of commissions charged on comparable
transactions by other brokers during comparable periods of time.
Purchases, Redemptions and Pricing of Shares
All investments in the Trust are credited to the shareholder's account in the form of full and fractional shares of the designated Fund (rounded to the nearest 1/1000 of a share). The Trust does not issue share certificates.
The net asset value ("NAV") per share of the Fund is determined once daily, as of the close of regular trading on the New York Stock Exchange (the "Exchange") (generally 4 P.M. Eastern Time) on each business day the Exchange is open for regular trading (and on such other days as the Board determines). However, to the extent that a Fund's investments are traded in markets that are open when the New York Stock Exchange is closed, the value of the Fund's investments may change on days when shares cannot be purchased or redeemed.
The Trust will not compute NAV for the Fund on customary national business holidays, including the following: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund reserves the right to not determine NAV when: (i) the Fund has not received any orders to purchase, sell or exchange shares and (ii) changes in the value of the Fund's portfolio do not affect the Fund's net asset value.
The offering price for orders placed before the close of the Exchange on each business day the Exchange is open for trading, will be based upon calculation of the NAV at the close of regular trading on the Exchange. For orders placed after the close of regular trading on the Exchange, or on a day on which the Exchange is not open for trading, the offering price is based upon NAV at the close of the Exchange on the next day thereafter on which the Exchange is open for trading. The NAV of a share of the Fund on which offering and redemption prices are based is the NAV of the Fund, divided by the number of shares outstanding, with the result adjusted to the nearer cent. The NAV of the Fund is determined by subtracting the liabilities of the Fund from the value of its assets (chiefly composed of investment securities). The NAV per share for a class is calculated by adding the value of all securities and other assets of the Fund allocable to the class, deducting liabilities allocable to that class, and dividing by the number of that class' shares outstanding.
Securities for which market quotations are readily available are values at current market value as of Valuation Time. Valuation Time will be as of the close of regular trading on the New York Stock Exchange (usually 4 P.M. Eastern Time). Equity securities are valued at the last quoted sale price, or if there is no sale price, the last quoted bid price provided by an independent pricing service approved by the Board of Trustees. Securities traded on
NASDAQ are valued at the NASDAQ Official Closing Price. Prices are taken from the primary market or exchange in which each security trades.
Debt and other fixed-income securities (other than short-term obligations) are valued at the last quoted bid price and/or by using a combination of daily quotes and matrix evaluations provided by an independent pricing service, the use of which has been approved by the Board of Trustees of the Trust. Short-term debt securities such as commercial paper and U.S. treasury bills, having a remaining maturity of 60 days or less are considered to be "short-term" and are valued at amortized cost which approximates market value. The pricing service activities and results are reviewed by an officer of the Trust.
The pricing service activities and results are reviewed by an officer of the Trust. Securities for which market quotations are not readily available, or for which an independent pricing service does not provide a value or provides a value that does not represent fair value in the judgment of GMFCT or designee, are valued at fair value under procedures approved by the Board of Trustees. Fair value determinations are required for securities whose value is affected by a significant event that will materially affect the value of a domestic or foreign security and which occurs subsequent to the time of the close of the principal market on which such domestic or foreign security trades but prior to the calculation of the Fund's NAV.
The Fund values foreign equity securities at fair value in the circumstances described below. Generally, trading in foreign securities markets is completed each day at various times prior to the Valuation Time. Due to the time differences between the closings of the relevant foreign securities exchanges and the Valuation Time for the Fund, the Fund will fair value its foreign investments when the market quotations for the foreign investments either are not readily available or are unreliable and, therefore, do not represent fair value. When fair value prices are utilized, these prices will attempt to reflect the impact of the financial markets' perceptions and trading activities on the Fund's foreign investments since the last closing prices of the foreign investments were calculated on their primary foreign securities markets or exchanges. For these purposes, the Board of Trustees of the Trust have determined that movements in relevant indices or other appropriate market indicators, after the close of the foreign securities exchanges, may demonstrate that market quotations are unreliable, and may trigger fair value pricing for certain securities. Consequently, fair valuation of portfolio securities may occur on a daily basis. The fair value pricing by the Trust utilizes data furnished by an independent pricing service (and that data draws upon, among other information, the market values of foreign investments). The fair value prices of portfolio securities generally will be used when it is determined that the use of such prices will have an impact on the net asset value of the Fund. When the Fund uses fair value pricing, the values assigned to the Fund's foreign investments may not be the quoted or published prices of the investments on their primary markets or exchanges.
The Trust may suspend the right of redemption for such periods as are permitted under the 1940 Act and under the following unusual circumstances: (a) when the New York Stock Exchange is closed (other than weekends and holidays) or trading is restricted; (b) when an emergency exists, making disposal of portfolio securities or the valuation of net assets not reasonably practicable; or (c) during any period when the SEC has by order permitted a suspension of redemption for the protection of shareholders.
Systematic Investment Strategies
Automatic Asset Accumulation - This is a systematic investment strategy which combines automatic monthly transfers from your personal checking account to your mutual fund account with the concept of Dollar Cost Averaging. With this strategy, you invest a fixed amount monthly over an extended period of time, during both market highs and lows. Dollar Cost Averaging can allow you to achieve a favorable average share cost over time since your fixed monthly investment buys more shares when share prices fall during low markets, and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past. Once you have opened an
account with at least $1,000, you can contribute to an Automatic Asset Accumulation plan for as little as $50 a month in the Fund.
Automatic Asset Transfer - This systematic investment plan allows you to transfer $25 or more to one Fund from another Fund systematically, monthly or quarterly, after Fund minimums have been met. The money is transferred on the 25th day of the month as selected or on the preceding business day. Dividends of any amount can be moved automatically from one Fund to another at the time they are paid. This strategy can provide investors with the benefits of Dollar Cost Averaging through an opportunity to achieve a favorable average share cost over time. With this plan, your fixed monthly or quarterly transfer from the Fund to any other Fund you select buys more shares when share prices fall during low markets and fewer shares at higher prices during market highs. Although no formula can assure a profit or protect against loss in a declining market, systematic investing has proven a valuable investment strategy in the past. For transfers from the Prime Shares of the Gartmore Money Market Fund to the Fund, sales charges may apply if not already paid.
Automatic Withdrawal Plan ($50 or More) - You may have checks for any fixed amount of $50 or more automatically sent bi-monthly, monthly, quarterly, semiannually or annually, to you (or anyone you designate) from your account for Class A, Class B and Class C shares. Complete the appropriate section of the Mutual Fund Application for New Accounts or contact your financial intermediary or the Transfer Agent. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce and eventually deplete your account. Generally, it is not advisable to continue to purchase Class A or Class C shares subject to a sales charge. The $50 minimum is waived for required minimum distributions from individual retirement accounts.
NOTE: If you are withdrawing more shares than your account receives in dividends, you will be decreasing your total shares owned, which will reduce your future dividend potential.
Automatic Withdrawal Plan (AWP) on Class B Shares - You will not be charged a CDSC on redemptions if you redeem 12% or less of your account value in a single year.
For each AWP payment, assets that are not subject to a CDSC, such as appreciation on shares and shares acquired through reinvestment of dividends and/or capital gains distributions, will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC to cover a particular AWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any dividends and/or capital gains distributions taken in cash by a shareholder who receives payments through AWP will also count toward the 12% limit. In the case of AWP, the 12% limit is calculated at the time of an automatic redemption is first made, and is recalculated at the time each additional automatic redemption is made.
Investor Privileges
The Fund offers the following privileges to shareholders. Additional information may be obtained by calling GDSI toll free at 800-848-0920.
No Sales Charge on Reinvestments - All dividends and capital gains will be automatically reinvested free of charge in the form of additional shares within the same fund and class or another specifically requested fund (but the same class) unless you have chosen to receive them in cash on your application. Unless requested in writing by the shareholder, the Trust will not mail checks for dividends and capital gains of less than $5 but instead they will be automatically reinvested in the form of additional shares.
Exchange Privilege - The exchange privilege is a convenient way to exchange shares from one Gartmore Fund to another Gartmore Fund in order to respond to changes in your goals or in market conditions. The registration of the account to which you are making an exchange must be exactly the same as that of the fund account from which the exchange is made, and the amount you exchange must meet the applicable minimum investment of the fund being purchased. The exchange privilege may be limited due to excessive trading or market timing of fund shares.
Exchanges among Gartmore Funds
Exchanges may be made among any of the Gartmore Funds within the same class of shares (except for any other Fund not currently accepting purchase orders or Class X or Class Y shares of the Fixed Income Funds), as long as both accounts have the same owner, and your first purchase in the new Fund meets the new Fund's minimum investment requirement (and subject to the investor eligibility requirements for the Gartmore Short Duration Bond Fund).
Because Class R shares of the Fund are held within retirement plans, exchange privileges with other Class R shares of the Gartmore Funds may not be available unless the Class R shares of the other Gartmore Funds are also available within a plan. Please contact your retirement plan administrator for information on how to exchange your Class R shares within your retirement plan.
Generally, there is no sales charge for exchanges of Class B, Class C, Institutional Service Class or Institutional Class shares. However, if your exchange involves certain Class A shares, you may have to pay the difference between the sales charges if a higher sales charge applies to the Fund into which you are exchanging. If you exchange your Class A shares that are subject to a CDSC into another Gartmore Fund and then redeem those Class A shares within 18 months of the original purchase (24 months for Gartmore Enhanced Incomr Fund and Gartmore Short Duration Bond Fund), the applicable CDSC will be the CDSC for the Fund. Exchanges into the Prime Shares of the Money Market Fund are only permitted from Class A, Class B, Class C and Institutional Service Class shares of the Fund. If you exchange Class B, or Class C, shares (or certain Class A shares subject to a CDSC) for Prime Shares of the Money Market Fund, the time you hold the shares in the Money Market Fund will not be counted for purposes of calculating any CDSC. As a result, if you then sell your Prime Shares of the Money Market Fund, you will pay the sales charge that would have been charged if the initial Class B, Class C, (or certain Class A) shares had been sold at the time they were originally exchanged into the Money Market Fund. If you exchange your Prime Shares of the Money Market Fund back into Class B or Class C (or certain Class A) shares, the time you held Class B, Class C shares (or certain Class A) shares prior to the initial exchange into the Money Market Fund will be counted for purposes or calculating the CDSC. If you wish to purchase shares of the Fund or class for which the exchange privilege does not apply, you will pay any applicable CDSC at the time you redeem your shares and pay any applicable front-end load on the new Fund you are purchasing unless a sales charge waiver otherwise applies.
Exchanges May Be Made Four Convenient Ways:
By Telephone
Automated Voice Response System - You can automatically process exchanges by calling 800-848-0920, 24 hours a day, seven days a week. However, if you declined the option on the application, you will not have this automatic exchange privilege. This system also gives you quick, easy access to mutual fund information. Select from a menu of choices to conduct transactions and hear the Fund price information, mailing and wiring instructions as well as other mutual fund information. You must call our toll free number by the Valuation Time to receive that day's closing share price. The Valuation Time is the close of regular trading of the New York Stock Exchange, which is usually 4:00 p.m. Eastern Time.
Customer Service Line - By calling 800-848-0920, you may exchange shares by telephone. Requests may be made only by the account owner(s). You must call our toll free number by the Valuation Time to receive that day's closing share price.
The Fund may record all instructions to exchange shares. The Fund reserves the right at any time without prior notice to suspend, limit or terminate the telephone exchange privilege or its use in any manner by any person or class.
The Fund will employ the same procedure described under "Buying, Selling and Exchanging Fund Shares" in the Prospectus to confirm that the instructions are genuine.
The Fund will not be liable for any loss, injury, damage, or expense as a result of acting upon instructions communicated by telephone reasonably believed to be genuine, and the Fund will be held harmless from any loss, claims or liability arising from its compliance with such instructions. These options are subject to the terms and conditions set forth in the Prospectus and all telephone transaction calls may be recorded. The Fund
reserves the right to revoke this privilege at any time without notice to shareholders and request the redemption in writing, signed by all shareholders.
By Mail or Fax - Write Gartmore Funds, P.O. Box 182205, Columbus, Ohio 43218-2205 or fax (614) 428-3278. Please be sure that your letter or facsimile is signed exactly as your account is registered and that your account number and the Fund from which you wish to make the exchange are included. For example, if your account is registered "John Doe and Mary Doe", "Joint Tenants With Right of Survivorship,' then both John and Mary must sign the exchange request. The exchange will be processed effective the date the signed letter or fax is received. Fax requests received after the Valuation Time will be processed as of the next business day. The Fund reserves the right to require the original document if you use the fax method.
By On-Line Access - Log on to our website www.nwdfunds.com 24 hours a day, seven days a week, for easy access to your mutual fund accounts. Once you have reached the website, you will be instructed on how to select a password and perform transactions. You can choose to receive information on all Gartmore Funds as well as your own personal accounts. You may also perform transactions, such as purchases, redemptions and exchanges. The Fund may terminate the ability to buy Fund shares on its website at any time, in which case you may continue to exchange shares by mail, wire or telephone pursuant to the Prospectus.
Free Check Writing Privilege (Prime Shares of the Gartmore Money Market Fund) - You may request a supply of free checks for your personal use and there is no monthly service fee. You may use them to make withdrawals of $500 or more from your account at any time. Your account will continue to earn daily income dividends until your check clears your account. There is no limit on the number of checks you may write. Cancelled checks will not be returned to you. However, your monthly statement will provide the check number, date and amount of each check written. You will also be able to obtain copies of cancelled checks, the first five free and $2.00 per copy thereafter, by contacting one of our service representatives at 800-848-0920.
Investor Services
Automated Voice Response System - Our toll free number 800-848-0920 will connect you 24 hours a day, seven days a week to the system. Through a selection of menu options, you can conduct transactions, hear fund price information, mailing and wiring instructions and other mutual fund information.
Toll Free Information and Assistance - Customer service representatives are available to answer questions regarding the Fund and your account(s) between the hours of 8 a.m. and 9 p.m. Eastern Time (Monday through Friday). Call toll free: 800-848-0920 or contact us at our fax number (614)- 428-3278.
Retirement Plans- Shares of the Fund may be purchased for Self-Employed Retirement Plans, Individual Retirement Accounts (IRAs), Roth IRAs, Coverdell Education Savings Accounts, Simplified Employee Pension Plans, Corporate Pension Plans, Profit Sharing Plans and Money Purchase Plans. For a free information kit, call 800-848-0920.
Shareholder Confirmations - You will receive a confirmation statement each time a requested transaction is processed. However, no confirmations are mailed on certain pre-authorized, systematic transactions, or IRAs. Instead, these will appear on your next consolidated statement.
Consolidated Statements - Shareholders of the Fund receive quarterly statements as of the end of March, June, September and December. Please review your statement carefully and notify us immediately if there is a discrepancy or error in your account.
For shareholders with multiple accounts, your consolidated statement will reflect all your current holdings in the Gartmore Funds. Your accounts are consolidated by Social Security number and zip code. Accounts in your household under other Social Security numbers may be added to your statement at your request. Only transactions during the reporting period will be reflected on the statements. An annual summary statement reflecting all calendar-year transactions in all your funds will be sent after year-end.
Average Cost Statement - This statement may aid you in preparing your tax return and in reporting capital gains and losses to the IRS. If you redeemed any shares during the calendar year, a statement reflecting your taxable gain or loss for the calendar year (based on the average cost you paid for the redeemed shares) will be mailed to you following each year-end. Average cost can only be calculated on accounts opened on or after January 1, 1984. Fiduciary accounts and accounts with shares acquired by gift, inheritance, transfer, or by any means other than a purchase cannot be calculated.
Average cost is one of the IRS approved methods available to compute gains or losses. You may wish to consult a tax adviser on the other methods available. The average cost information will not be provided to the IRS. If you have any questions, contact one of our service representatives at 800-848-0920.
Shareholder Reports - All shareholders will receive reports semiannually detailing the financial operations of the Fund.
Prospectuses - An updated prospectus will be mailed to you at least annually.
Undeliverable Mail - If mail from the Fund to a shareholder is returned as undeliverable on two or more consecutive occasions, the Fund will not send any future mail to the shareholder unless it receives notification of a correct mailing address for the shareholder. With respect to any redemption checks or dividend/capital gains distribution checks that are returned as undeliverable or not presented for payment within six months, the Trust reserves the right to reinvest the check proceeds and any future distributions in shares of the Fund at the then-current net asset value of the Fund until the Fund receives further instructions from the shareholder.
Performance Advertising
The Fund may use past performance in advertisements, sales literature, and its prospectus, including calculations of average annual total return, as described below.
Total Return
The Fund may from time to time advertise historical performance, subject to Rule 482 under the Securities Act, or Rule 34b-1 under the 1940 Act. An investor should keep in mind that any return or yield quoted represents past performance and is not a guarantee of future results. The investment return and principal value of investments will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
All performance advertisements shall include average annual total return quotations for the most recent one-, five-, and ten-year periods (or life, if the Fund has been in operation less than one of the prescribed periods). Average annual total return represents the rate required each year for an initial investment to equal the redeemable value at the end of the quoted period. It is calculated in a uniform manner by dividing the ending redeemable value of a hypothetical initial payment of $1,000 for a specified period of time, by the amount of the initial payment, assuming reinvestment of all dividends and distributions. The one-, five-, and ten-year periods are calculated based on periods that end on the last day of the calendar quarter preceding the date on which an advertisement is submitted for publication.
ADDITIONAL INFORMATION
Description of Shares
The Amended Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest of the Fund and to divide or combine such shares into a greater or lesser number of shares without thereby exchanging the proportionate beneficial interests in the Trust. Each share of the Fund represents an equal proportionate interest in the Fund with each other share. The Trust reserves the right to create and issue a number of different funds. Shares of the Fund would participate equally in the earnings, dividends, and assets those particular funds. Upon liquidation of the Fund, shareholders are entitled to share pro rata in the net assets of the Fund available for distribution to shareholders.
The Trust is currently authorized to offer shares of beneficial interest, without par value, in 49 series. With respect to the Fund, the Trust is authorized to offer the following share classes: Class A, Class B, Class C, Class R, Institutional Service Class, and Institutional Class.
You have an interest only in the assets of the shares of the Fund which you own. Shares of a particular class are equal in all respects to the other shares of that class. In the event of liquidation of the Fund, shares of the same class will share pro rata in the distribution of the net assets of the Fund with all other shares of that class. All shares are without par value and when issued and paid for, are fully paid and nonassessable by the Trust. Shares may be exchanged or converted as described in this SAI and in the Prospectus but will have no other preference, conversion, exchange or preemptive rights.
Voting Rights
Shareholders of each class of shares have one vote for each share held and a proportionate fractional vote for any fractional share held. An annual or special meeting of shareholders to conduct necessary business is not required by the Declaration of Trust, the 1940 Act or other authority except, under certain circumstances, to amend the Declaration of Trust, the Investment Advisory Agreement, fundamental investment objectives, investment policies and investment restrictions, to elect and remove Trustees, to reorganize the Trust or any series or class thereof and to act upon certain other business matters. In regard to termination, sale of assets, the change of investment objectives, policies and restrictions or the approval of an Investment Advisory Agreement, the right to vote is limited to the holders of shares of the particular fund affected by the proposal. In addition, holders of shares subject to a Rule 12b-1 fee will vote as a class and not with holders of any other class with respect to the approval of the Distribution Plan.
To the extent that such a meeting is not required, the Trust does not intend to have an annual or special meeting of shareholders. The Trust has represented to the SEC that the Trustees will call a special meeting of shareholders for purposes of considering the removal of one or more Trustees upon written request therefor from shareholders holding not less than 10% of the outstanding votes of the Trust and the Trust will assist in communicating with other shareholders as required by Section 16(c) of the 1940 Act. At such meeting, a quorum of shareholders (constituting a majority of votes attributable to all outstanding shares of the Trust), by majority vote, has the power to remove one or more Trustees.
Shareholder Inquiries
All inquiries regarding the Trust should be directed to the Trust at the telephone number or address shown on the cover page of this SAI.
ADDITIONAL GENERAL TAX INFORMATION
Buying a dividend
If you invest in the Fund shortly before the record date of a taxable distribution, the distribution will lower the value of the Fund's shares by the amount of the distribution, and you will in effect receive some of your investment back, but in the form of a taxable distribution.
Multi-class funds
The Fund calculates dividends and capital gain distributions in the same manner for each class. The amount of any dividends per share will differ, however, generally due to the difference in the distribution and service (Rule 12b-1) and administrative services fees applicable to each class.
Distributions of net investment income
The Fund receives income generally in the form of dividends and interest on its investments. This income, less expenses incurred in the operation of the Fund, constitutes the Fund's net investment income from which
income dividends may be paid to you. If you are a taxable investor, any distributions by the Fund from such income (other than qualified dividend income received by individuals) will be taxable to you at ordinary income tax rates, whether you receive them in cash or in additional shares. Distributions from qualified dividend income will be taxable to individuals at long-term capital gain rates, provided certain holding period requirements are met. See the discussion below under the heading, "Qualified Dividend Income for Individuals."
Distributions of capital gain
The Fund may realize a capital gain or loss in connection with sales or other dispositions of its portfolio securities. Distributions from net short-term capital gain will be taxable to you as ordinary income. Distributions paid from the excess of net long-term capital gain over net short-term capital loss will be taxable to you as long-term capital gain, regardless of how long you have held your shares in the Fund. Any net short-term or long-term capital gain realized by the Fund (net of any capital loss carryovers) generally will be distributed once each year and may be distributed more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund.
Returns of Capital
If the Fund's distributions exceed its taxable income and capital gains realized during a taxable year, all or a portion of the distributions made in the same taxable year may be recharacterized as a return of capital to shareholders. A return of capital distribution will generally not be taxable, but will reduce each shareholder's cost basis in the Fund and result in a higher reported capital gain or lower reported capital loss when those shares on which the distribution was received are sold. Any return of capital in excess of your basis, however, is taxable as a capital gain.
Investments in foreign securities
Effect of Foreign Withholding Taxes. A Fund may be subject to foreign withholding taxes on income from certain foreign securities. This, in turn, could reduce the Fund's distributions paid to you.
Effect of foreign debt investments on distributions. Most foreign exchange gains realized on the sale of debt securities are treated as ordinary income by the Fund. Similarly, foreign exchange losses realized on the sale of debt securities generally are treated as ordinary losses. These gains when distributed are taxable to you as ordinary income, and any losses reduce the Fund's ordinary income otherwise available for distribution to you. This treatment could increase or decrease the Fund's ordinary income distributions to you, and may cause some or all of the Fund's previously distributed income to be classified as a return of capital.
PFIC securities. The Fund may invest in securities of foreign entities that could be deemed for tax purposes to be passive foreign investment companies (PFICs). When investing in PFIC securities, the Fund intends to mark-to-market these securities and recognizes any gains at the end of its fiscal and excise (described below) tax years. Deductions for losses are allowable only to the extent of any current or previously recognized gains. These gains (reduced by allowable losses) are treated as ordinary income that the Fund is required to distribute, even though it has not sold the securities. You should also be aware that the designation of a foreign security as a PFIC security would cause its income dividends to fall outside of the definition of qualified foreign corporation dividends. These dividends will not qualify for the reduced rate of taxation on qualified dividends for individuals when distributed to you by the Fund. If the Fund is unable to identify an investment as a PFIC and thus does not make a mark-to-market election, the Fund may be subject to U.S. federal income tax on a portion of any "excess distribution" or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the Fund to its shareholders. Additional charges in the nature of interest may be imposed on the Fund in respect of deferred taxes arising from such distributions or gains.
Information on the amount and tax character of distributions
The Fund will inform you of the amount of your ordinary income and capital gain dividends at the time they are paid, and will advise you of their tax status for federal income tax purposes shortly after the end of each calendar year. If you have not held Fund shares for a full year, the Fund may designate and distribute to you, as ordinary income, qualified dividends or capital gains, and in the case of non-U.S. shareholders, the Fund may further designate and distribute as interest-related dividends and short-term capital gain dividends, a percentage of income that may not be equal to the actual amount of this type of income earned during the period of your investment in the Fund. Taxable distributions declared by the Fund in December but paid in January are taxable to you as if they were paid in December.
Election to be taxed as a regulated investment company
The Fund intends to elect or has elected to be treated as a regulated investment company under Subchapter M of the Code. As a regulated investment company, the Fund generally pays no federal income tax on the income and gain it distributes to you. The Trust's Board of Trustees reserves the right not to maintain the qualification of the Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders. In such a case, the Fund would be subject to federal, and possibly state, corporate taxes on its taxable income and gain, and distributions to you would be taxed as dividend income to the extent of the Fund's earnings and profits.
In order to qualify as a regulated investment company for federal income tax purposes, the Fund must meet certain specific requirements, including:
(i) the Fund must maintain a diversified Fund of securities, wherein no security, including the securities of a qualified publicly traded partnership (other than U.S. government securities and securities of other regulated investment companies) can exceed 25% of the Fund's total assets, and, with respect to 50% of the Fund's total assets, no investment (other than cash and cash items, U.S. government securities and securities of other regulated investment companies) can exceed 5% of the Fund's total assets or 10% of the outstanding voting securities of the issuer;
(ii) the Fund must derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or disposition of stock, securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities, or currencies, and net income derived from an interest in a qualified publicly traded partnership; and
(iii) the Fund must distribute to its shareholders at least 90% of its investment company taxable income and net tax-exempt income for each of its fiscal years.
Excise tax distribution requirements
To avoid federal excise taxes, the Code requires the Fund to distribute to you by December 31 of each year, at a minimum, the following amounts: 98% of its taxable ordinary income earned during the calendar year; 98% of its capital gain net income earned during the twelve-month period ending October 31; and 100% of any undistributed amounts from the prior year. The Fund intends to declare and pay these distributions in December (or to pay them in January, in which case you must treat them as received in December) but can give no assurances that its distributions will be sufficient to eliminate all taxes.
Sales of Fund shares
Sales and exchanges of Fund shares are taxable transactions for federal and state income tax purposes. If you sell your Fund shares, whether you receive cash or exchange them for shares of a different Gartmore Fund, the IRS requires you to report any gain or loss on your sale or exchange. If you owned your shares as a capital asset, any gain or loss that you realize generally is a capital gain or loss, and is long-term or short-term, depending on how long you owned your shares. Any redemption/exchange fees you incur on shares redeemed or exchanged within 90 days after the date they were purchased will decrease the amount of any capital gain (or increase any capital loss) you realize on the sale or exchange.
Sales at a loss within six months of purchase. Any loss incurred on the sale or exchange of Fund shares owned for six months or less is treated as a long-term capital loss to the extent of any long-term capital gains distributed to you by the Fund on those shares.
Deferral of basis - Class A shares only . In reporting gain or loss on the sale of your Fund shares, you may be required to adjust your basis in the shares you sell under the following circumstances:
IF:
o In your original purchase of Fund shares, you received a reinvestment right (the right to reinvest your sales proceeds at a reduced or with no sales charge), and
o You sell some or all of your original shares within 90 days of their purchase, and
o You reinvest the sales proceeds in the Fund or in another Gartmore Fund, and the sales charge that would otherwise apply is reduced or eliminated;
THEN:
In reporting any gain or loss on your sale, all or a portion of the sales charge that you paid for your original shares is excluded from your tax basis in the shares sold and added to your tax basis in the new shares.
Wash sales. All or a portion of any loss that you realize on the sale of your Fund shares is disallowed to the extent that you buy other shares in the Fund within 30 days before or after your sale. Any loss disallowed under these rules is added to your tax basis in the new shares.
U.S. government securities
The income earned on certain U.S. government securities is exempt from state and local personal income taxes if earned directly by you. States also grant tax-free status to dividends paid to you from interest earned on these securities, subject in some states to minimum investment or reporting requirements that must be met by the Fund. The income on Fund investments in certain securities, such as repurchase agreements, commercial paper and federal agency-backed obligations (e.g., Government National Mortgage Association (Ginnie Mae) or Federal National Mortgage Association (Fannie Mae) securities), generally does not qualify for tax-free treatment. The rules on exclusion of this income are different for corporations
Qualified dividend income for individuals
For individual shareholders, a portion of the dividends paid by the Fund may be qualified dividends eligible for taxation at long-term capital gain rates. This reduced rate generally is available for dividends paid by the Fund out of dividends earned on the Fund's investment in stocks of domestic corporations and qualified foreign corporations. Dividends from PFICs are not eligible to be treated as qualified dividend income.
Both the Fund and the investor must meet certain holding period requirements to qualify Fund dividends for this treatment. Specifically, the Fund must hold the stock for at least 61 days during the 121-day period beginning 60 days before the stock becomes ex-dividend. Similarly, investors must hold their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund distribution goes ex-dividend. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of stock is not entitled to receive the dividend payment. When counting the number of days you held your Fund shares, include the day you sold your shares but not the day you acquired these shares.
While the income received in the form of a qualified dividend is taxed at the same rates as long-term capital gains, such income will not be considered as a long-term capital gain for other federal income tax purposes. For example, you will not be allowed to offset your long-term capital losses against qualified dividend income on your federal income tax return. Any qualified dividend income that you elect to be taxed at these reduced rates also cannot be used as investment income in determining your allowable investment interest expense. For other limitations on the amount of or use of qualified dividend income on your income tax return, please contact your personal tax advisor.
After the close of its fiscal year, the Fund will designate the portion of its ordinary dividend income that meets the definition of qualified dividend income taxable at reduced rates. If 95% or more of the Fund's income is from qualified sources, it will be allowed to designate 100% of its ordinary income distributions as qualified dividend income.
Dividends-Received Deduction for Corporations
The portion of dividends paid by the Fund that qualifies for the corporate dividends-received deduction will be designated each year in a notice mailed to the Fund's shareholders, and cannot exceed the gross amount of dividends received by the Fund from domestic (U.S.) corporations that would have qualified for the dividends-received deduction in the hands of the Fund if the Fund was a regular corporation. Because the Fund's investment strategy is to invest in non-U.S. companies, none of the Fund's dividends are expected to qualify for the corporate dividends received deduction.
The availability of the dividends-received deduction is subject to certain holding period and debt financing restrictions imposed under the Code on the corporation claiming the deduction. The amount that the Fund may designate as eligible for the dividends-received deduction will be reduced or eliminated if the shares on which the dividends earned by the Fund were debt-financed or held by the Fund for less than a minimum period of time, generally 46 days during a 91-day period beginning 45 days before the stock becomes ex-dividend. Similarly, if your Fund shares are debt-financed or held by you for less than a 46-day period then the dividends-received deduction for Fund dividends on your shares may also be reduced or eliminated. Even if designated as dividends eligible for the dividends-received deduction, all dividends (including any deducted portion) must be included in your alternative minimum taxable income calculation.
Investment in complex securities
The Fund may invest in complex securities (e.g., futures, options, forward currency contracts, short-sales, PFICs, etc.) that may be subject to numerous special and complex tax rules. These rules could affect whether gain or loss recognized by the Fund is treated as ordinary or capital, or as interest or dividend income. These rules could also accelerate the recognition of income to the Fund (possibly causing the Fund to sell securities to raise the cash for necessary distributions). These rules could defer the Fund's ability to recognize a loss, and, in limited cases, subject the Fund to U.S. federal income tax on income from certain foreign securities. These rules could, therefore, affect the amount, timing, or character of the income distributed to you by the Fund.
Derivatives. The Fund is permitted to invest in a options, futures contracts, options on futures contracts, stock index options and forward currency contracts to hedge the Fund's portfolio or for any other permissible purposes consistent with that Fund's investment objective. If the Fund makes these investments, it could be required to mark-to-market these contracts and realize any unrealized gains and losses at its fiscal year end even though it continues to hold the contracts. Under these rules, gains or losses on the contracts generally would be treated as 60% long-term and 40% short-term gains or losses, but gains or losses on certain foreign currency contracts would be treated as ordinary income or losses. In determining its net income for excise tax purposes, the Fund also would be required to mark-to-market these contracts annually as of October 31 (for capital gain net income and ordinary income arising from certain foreign currency contracts), and to realize and distribute any resulting income and gains.
Constructive Sales. The Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize gain, but not loss, on the position.
Tax Straddles. The Fund's investment in options, futures, forwards, or foreign currency contracts (or in substantially similar or related property) in connection with certain hedging transactions could cause it to hold offsetting positions in securities. If the Fund's risk of loss with respect to specific securities in its portfolio is substantially diminished by the fact that it holds other securities, the Fund could be deemed to have entered into a tax "straddle" or to hold a "successor position" that would require any loss realized by it to be deferred for tax purposes.
Short sales and securities lending transactions. The Fund's entry into a short sale transaction or an option or other contract could be treated as the "constructive sale" of an "appreciated financial position," causing it to realize gain, but not loss, on the position. Additionally, the Fund's entry into securities lending transactions may cause the replacement income earned on the loaned securities to fall outside of the definition of qualified dividend income. This replacement income generally will not be eligible for reduced rates of taxation on qualified dividend income, and, to the extent that debt securities are loaned, will generally not qualify as qualified interest income for foreign withholding tax purposes.
Investment in REMIC residual interests (excess inclusion income). A Fund may invest in residual interests in certain mortgage pooling vehicles formed as real estate mortgage investment conduits ("REMICs"). The portion of the Fund's income received from REMIC residual interests, either directly or through an investment in a REIT that holds such interests or qualifies as a taxable mortgage pool (such income is referred to in the Code as "excess inclusion income") generally is required to be allocated by the Fund to its shareholders in proportion to the dividends paid to such shareholders with the same consequences as if the shareholders received the excess inclusion income directly.
Under these rules, a Fund will be taxed at the highest corporate income tax rate on its excess inclusion income that is allocable to the percentage of its shares held in record name by "disqualified organizations," which are generally certain cooperatives, governmental entities and tax-exempt organizations that are exempt from tax on unrelated business taxable income. To the extent that Fund shares owned by "disqualified organizations" are held in record name by a broker/dealer or other nominee, the broker/dealer or other nominee would be liable for the corporate level tax on the portion of the Fund's excess inclusion income allocable to Fund shares held by the broker/dealer or other nominee on behalf of the "disqualified organizations." The Fund expects that disqualified organizations own their shares. Because this tax is imposed at the Fund level, all shareholders, including shareholders that are not disqualified organizations, will bear a portion of the tax cost associated with the Fund's receipt of excess inclusion income. However, to the extent permissible under the 1940 Act, regulated investment companies such as the Fund are permitted under Treasury Regulations to specially allocate this tax expense to the disqualified organizations to which it is attributable, without a concern that such an allocation will constitute a preferential dividend.
Investments in securities of uncertain tax character. The Fund may invest in securities the U.S. Federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by the Fund, it could affect the timing or character of income recognized by the Fund, requiring the Fund to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Code.
Backup Withholding.
By law, the Fund must withhold a portion of your taxable dividends and sales proceeds unless you:
o provide your correct social security or taxpayer identification number,
o certify that this number is correct,
o certify that you are not subject to backup withholding, and
o certify that you are a U.S. person (including a U.S. resident alien).
The Fund also must withhold if the IRS instructs it to do so. When withholding is required, the amount will be 28% of any dividends or proceeds paid. The special U.S. tax certification requirements applicable to non-U.S. investors are described under the "Non-U.S. Investors" heading below.
Non-U.S. Investors.
Non-U.S. Investors may be subject to U.S. withholding and estate tax and are subject to special U.S. tax certification requirements. Foreign persons should consult their tax advisors about the applicability of U.S. tax withholding and the use of the appropriate forms to certify their status.
In general. The United States imposes a flat 30% withholding tax (or lower treaty rate) on U.S. source dividends.
Capital Gain Dividends & Short-Term Capital Gain Dividends. In general, capital gain dividends paid by the Fund from either long-term or short-term capital gains (other than gain realized on disposition of U.S. real property interests) are not subject to U.S. withholding tax unless you are a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year.
Interest-Related Dividends. Interest-related dividends paid by the Fund from qualified interest income are not subject to U.S. withholding tax. "Qualified interest income" includes, in general, U.S. source (1) bank deposit interest, (2) short-term original discount and (3) interest (including original issue discount, market discount, or acquisition discount) on an obligation which is in registered form, unless it is earned on an obligation issued by a corporation or partnership in which the Fund is a 10-percent shareholder or is contingent interest, and (4) any interest-related dividend from another regulated investment company. While the Fund makes every effort to disclose any amounts of interest-related dividends distributed to its non-U.S. shareholders, intermediaries who have assumed tax reporting responsibilities on these distributions may not have fully developed systems that will allow these tax withholding benefits to be passed through to them.
Sunset Date for Short-Term Capital Gain Dividends and Interest-Related Dividends. The exemption from withholding for short-term capital gain dividends and interest-related dividends paid by the Fund is effective for
dividends paid with respect to taxable years of the Fund beginning after December 31, 2004 and before January 1, 2008, unless such exemption is extended or made permanent.
Other. Ordinary dividends paid by the Fund to non-U.S. investors on the income earned on portfolio investments in (i) the stock of domestic and foreign corporations, and (ii) the debt of foreign issuers continue to be subject to U.S. withholding tax. If you hold your Fund shares in connection with a U.S. trade or business, your income and gains will be considered effectively connected income and taxed in the U.S. on a net basis, in which case you may be required to file a nonresident U.S. income tax return.
U.S. Estate Tax. A partial exemption from U.S estate tax may apply to stock in the Fund held by the estate of a nonresident decedent. The amount treated as exempt is based upon the proportion of the assets held by the Fund at the end of the quarter immediately preceding the decedent's death that are debt obligations, deposits, or other property that would generally be treated as situated outside the United States if held directly by the estate. This provision applies to decedents dying after December 31, 2004 and before January 1, 2008, unless such provision is extended or made permanent.
U.S Tax Certification Rules. Special U.S. tax certification requirements apply to non-U.S. shareholders both to avoid U.S. back up withholding imposed at a rate of 28% and to obtain the benefits of any treaty between the United States and the shareholder's country of residence. In general, a non-U.S. shareholder must provide a Form W-8 BEN (or other applicable Form W-8) to establish that you are not a U.S. person, to claim that you are the beneficial owner of the income and, if applicable, to claim a reduced rate of, or exemption from, withholding as a resident of a country with which the United States has an income tax treaty. A Form W-8BEN provided without a U.S. taxpayer identification number will remain in effect for a period beginning on the date signed and ending on the last day of the third succeeding calendar year unless an earlier change of circumstances makes the information on the form incorrect.
This discussion of "Additional General Tax Information For The Fund" is not intended or written to be used as tax advice and does not purport to deal with all federal tax consequences applicable to all categories of investors, some of which may be subject to special rules. You should consult your own tax advisor regarding your particular circumstances before making an investment in the Fund.
MAJOR SHAREHOLDERS
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, each located at One Nationwide Plaza, Columbus, Ohio 43215 and Nationwide Life Insurance Company of America ("NLICA"), located at 1000 Chesterbrook Boulevard, Berwyn, Pennsylvania 19312, are wholly-owned by Nationwide Financial Services, Inc. ("NFS"). Nationwide Life and Annuity Insurance Company of America, located at 300 Continental Drive, Newark, Delaware 19713, is wholly-owned by NLICA. NFS, a holding company, has two classes of common stock outstanding with different voting rights enabling Nationwide Corporation (the holder of all outstanding Class B Common Stock) to control NFS. Nationwide Corporation is also a holding company in the Nationwide Insurance Enterprise. All of the common stock of Nationwide Corporation is held by Nationwide Mutual Insurance Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), each of which is a mutual company owned by its policyholders.
As of October 31, 2006, the Trustees and Officers of the Trust as a group owned beneficially less than 1% of the shares of the Trust, and less than 1% of any class of the Fund.
As of February 2, 2007, the following shareholders held five percent or greater of the shares of a class of the Fund:
------------------------------------------------------------------------ ------------------------ ------------------- GARTMORE HEDGED CORE EQUITY FUND CLASS A Number of Shares Percent of Class ------------------------------------------------------------------------ ------------------------ ------------------- NATIONAL INVESTOR SERVICES 9587.728 98.96% CORP. 55 WATER STREET NEW YORK NY 10041 ------------------------------------------------------------------------ ------------------------ ------------------- GARTMORE HEDGED CORE EQUITY FUND CLASS B ------------------------------------------------------------------------ ------------------------ ------------------- NWD INVESTMENTS 100.122 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428--2436 ------------------------------------------------------------------------ ------------------------ ------------------- GARTMORE HEDGED CORE EQUITY FUND CLASS C ------------------------------------------------------------------------ ------------------------ ------------------- NWD INVESTMENTS 100.122 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428--2436 ------------------------------------------------------------------------ ------------------------ ------------------- GARTMORE HEDGED CORE EQUITY FUND INSTITUTIONAL CLASS ------------------------------------------------------------------------ ------------------------ ------------------- NATIONWIDE MUTUAL INSURANCE COMPANY 501889.262 100.00% ATTN KEVIN KING 1 NATIONWIDE PLZ 1-33-13 COLUMBUS OH 43215-2220 ------------------------------------------------------------------------ ------------------------ ------------------- GARTMORE HEDGED CORE EQUITY FUND CLASS R ------------------------------------------------------------------------ ------------------------ ------------------- NWD INVESTMENTS 100.207 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 ------------------------------------------------------------------------ ------------------------ ------------------- GARTMORE HEDGED CORE EQUITY FUND INSTITUTIONAL SERVICE CLASS ------------------------------------------------------------------------ ------------------------ ------------------- NWD INVESTMENTS 100.378 100.00% SEED ACCOUNT ATTN DANIEL BRZEZINSKI 1200 RIVER RD SUITE 1000 CONSHOHOCKEN PA 19428-2436 ------------------------------------------------------------------------ ------------------------ ------------------- |
FINANCIAL STATEMENTS
The Report of Independent Registered Public Accounting Firm and Financial Statements for the Trust for the fiscal year ended October 31, 2006 in the Trust's Annual Report are incorporated herein by reference. Copies of the Trust's Annual Reports and Semi-Annual Reports are available without charge upon request by writing the Trust or by calling toll free 800-848-0920.
APPENDIX A
DEBT RATINGS
STANDARD & POOR'S DEBT RATINGS
A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA - Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A - Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB- Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
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SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. 'BB' indicates the least degree of speculation and 'C' the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB - Debt rated 'BB' is less vulnerable to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal
payments.
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B - Debt rated 'B' has a greater vulnerability to default than
obligations rated BB but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
CCC - Debt rated 'CCC' is currently vulnerable to default, and is
dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest
and repay principal.
CC - Debt rated 'CC' typically is currently highly vulnerable to
nonpayment.
C - Debt rated 'C' signifies that a bankruptcy petition has been filed,
but debt service payments are continued.
D - Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired,
unless Standard & Poor's believes that such payments will be made
during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are
jeopardized.
MOODY'S LONG-TERM DEBT RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection
of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
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Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
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STATE AND MUNICIPAL NOTES
Excerpts from Moody's, description of state and municipal note ratings:
MIG-1-- Notes bearing this designation are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing from established and board-based access to the market for
refinancing, or both.
MIG-2-- Notes bearing this designation are of high quality, with margins of
protection ample although not so large as in the preceding group.
MIG-3-- Notes bearing this designation are of favorable quality, with all
security elements accounted for but lacking the strength of the
preceding grade. Market access for refinancing, in particular, is
likely to be less well established.
FITCH, INC. BOND RATINGS
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Fitch, Inc. ("Fitch") investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue or class of debt in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Bonds that have the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA Bonds considered investment grade and representing the lowest
expectation of credit risk. The obligor has an exceptionally
strong capacity for timely payment of financial commitments, a
capacity that is highly unlikely to be adversely affected by
foreseeable events.
AA Bonds considered investment grade and of very high credit
quality. This rating indicates a very strong capacity for timely
payment of financial commitments, a capacity that is not
significantly vulnerable to foreseeable events.
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A Bonds considered investment grade and representing a low
expectation of credit risk. This rating indicates a strong
capacity for timely payment of financial commitments. This
capacity may, nevertheless, be more vulnerable to changes in
economic conditions or circumstances than long term debt with
higher ratings.
BBB Bonds considered to be in the lowest investment grade and
indicating that there is currently low expectation of credit
risk. The capacity for timely payment of financial commitments
is considered adequate, but adverse changes in economic
conditions and circumstances are more likely to impair this
capacity.
BB Bonds are considered speculative. This rating indicates that
there is a possibility of credit risk developing, particularly
as the result of adverse economic changes over time; however,
business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this
category are not investment grade.
B Bonds are considered highly speculative. This rating indicates
that significant credit risk is present, but a limited margin of
safety remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.
CCC, CC and C Bonds are considered a high default risk. Default is a real
possibility. Capacity for meeting financial commitments is
solely reliant upon sustained, favorable business or economic
developments. A 'CC' rating indicates that default of some kind
appears probable. 'C' rating signals imminent default.
DDD, DD and D Bonds are in default. Such bonds are not meeting current
obligations and are extremely speculative. 'DDD' designates the
highest potential for recovery of amounts outstanding on any
securities involved and 'D' represents the lowest potential for
recovery.
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SHORT-TERM RATINGS
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market.
Ratings are graded into several categories, ranging from 'A-1' for the highest quality obligations to 'D' for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated 'A-1'.
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Issues rated 'B' are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.
D Debt rated 'D' is in payment default. the 'D' rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such
grace period.
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STANDARD & POOR'S NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating.
The following criteria will be used in making the assessment:
1. Amortization schedule - the larger the final maturity relative to other maturities, the more likely the issue is to be treated as a note.
2. Source of payment - the more the issue depends on the market for its refinancing, the more likely it is to be considered a note.
Note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong capacity to pay principal and interest are given
a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
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MOODY'S SHORT-TERM RATINGS
Moody's short-term debt ratings are opinions on the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged investment grade, to indicate the relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or supporting institutions) have a superior capacity for repayment of senior short-term debt obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: (I) leading market positions in well established industries, (II) high rates of return on funds employed, (III) conservative capitalization structures with moderate reliance on debt and ample asset protection, (IV) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (V) well established access to a range of financial markets and assured sources of alternative liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the prime rating categories.
MOODY'S NOTE RATINGS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
SG This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
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FITCH'S SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+ Exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1 Very strong credit quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2 Good credit quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings.
APPENDIX B
PROXY VOTING GUIDELINES SUMMARIES
GARTMORE MUTUAL FUNDS CAPITAL TRUST
GENERAL
The Board of Trustees of the Funds has confirmed the continued delegation of the authority to vote proxies relating to the securities held in the portfolios of the Funds to the Fund's investment adviser or sub-adviser, as the case may be, after each such Board reviewed and considered the proxy voting policies and procedures used by each of the investment advisers and sub-advisers of the Funds, some of which advisers and sub-advisers use an independent service provider, as described below.
Gartmore Mutual Fund Capital Trust. ( "GMFCT") is an investment adviser that is registered with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act"). GMFCT provides investment advisory services to various types of clients, including registered and unregistered investment companies, collective trusts, institutional separate accounts, wrap accounts, insurance general accounts, charitable endowments, Taft-Hartley Act plans, ERISA plans, state-sponsored funds, managed separate accounts, and individuals (hereinafter referred to collectively as the "Clients").
Voting proxies that are received in connection with underlying portfolio securities held by Clients is an important element of the portfolio management services that GMFCT performs for Clients. GMFCT's goal in performing this service is to make proxy voting decisions: (i) to vote or not to vote proxies in a manner that serves the best economic interests of advisory clients; and (ii) that avoid the influence of conflicts of interest. To implement this goal, GMFCT has adopted proxy voting guidelines (the "GMFCT Proxy Voting Guidelines") to assist GMFCT in making proxy voting decisions and in developing procedures for effecting those decisions. The GMFCT Proxy Voting Guidelines are designed to ensure that where GMFCT has the authority to vote proxies, all legal, fiduciary, and contractual obligations will be met.
The GMFCT Proxy Voting Policies address a wide variety of individual topics, including, among other matters, shareholder voting rights, anti-takeover defenses, board structures and the election of directors, executive and director compensation, reorganizations, mergers, and various shareholder proposals. The proxy voting records of the Funds are available to shareholders on the SEC's website.
HOW PROXIES ARE VOTED
GMFCT has delegated to Institutional Shareholder Services ("ISS"), an independent service provider, the administration of proxy voting for Client portfolio securities directly managed by GMFCT. ISS, a Delaware corporation, provides proxy-voting services to many asset managers on a global basis. A committee of GMFCT personnel has reviewed, and will continue to review annually, GMFCT's relationship with ISS and the quality and effectiveness of the various services provided by ISS.
Specifically, ISS assists GMFCT in the proxy voting and corporate governance oversight process by developing and updating the "ISS Proxy Voting Guidelines," which are incorporated into the GMFCT Proxy Voting Guidelines, and by providing research and analysis, recommendations regarding votes, operational implementation, and recordkeeping and reporting services. GMFCT's decision to retain ISS is based principally on the view that the services that ISS provides, subject to oversight by GMFCT, generally will result in proxy voting decisions which serve the best economic interests of Clients. GMFCT has reviewed, analyzed, and determined that the ISS Proxy Voting Guidelines are consistent with the views of GMFCT on the various types of proxy proposals. When the ISS Proxy Voting Guidelines do not cover a specific proxy issue and ISS does not provide a recommendation: (i) ISS will notify GMFCT; and (ii) GMFCT will use its best judgment in voting proxies on behalf of the Clients. A summary of the ISS Proxy Voting Guidelines is set forth below.
CONFLICTS OF INTEREST
GMFCT and its subsidiaries do not engage in investment banking, administration or management of corporate retirement plans, or any other activity that is likely to create a potential conflict of interest. In addition, because Client proxies are voted by ISS pursuant to the pre-determined ISS Proxy Voting Guidelines, GMFCT generally does not make an actual determination of how to vote a particular proxy, and, therefore, proxies voted on behalf of the Clients do not reflect any conflict of interest. Nevertheless, the GMFCT Proxy Voting Guidelines address the possibility of such a conflict of interest arising.
The GMFCT Proxy Voting Guidelines provide that, if a proxy proposal were to create a conflict of interest between the interests of a Client and those of GMFCT (or between a Client and those of any of GMFCT's affiliates, including Gartmore Distribution Services, Inc., and Nationwide), then the proxy should be voted strictly in conformity with the recommendation of ISS. To monitor compliance with this policy, any proposed or actual deviation from a recommendation of ISS must be reported to the chief counsel for GMFCT. The chief counsel for GMFCT then will provide guidance concerning the proposed deviation and whether a deviation presents any potential conflict of interest. If GMFCT then casts a proxy vote that deviates from an ISS recommendation, the affected Client (or other appropriate Client authority) will be given a report of this deviation.
CIRCUMSTANCES UNDER WHICH PROXIES WILL NOT BE VOTED
GMFCT, through ISS, shall attempt to process every vote for all domestic and foreign proxies that GMFCT receives; however, there may be cases in which GMFCT will not process a proxy because it is impractical or too expensive to do so. For example, GMFCT will not process a proxy in connection with a foreign security if the cost of voting a foreign proxy outweighs the benefit of voting the foreign proxy, when GMFCT has not been given enough time to process the vote, or when a sell order for the foreign security is outstanding and proxy voting would impede the sale of the foreign security. Also, GMFCT generally will not seek to recall the securities on loan for the purpose of voting the securities.
DELEGATION OF PROXY VOTING TO SUB-ADVISERS TO FUNDS
For any Fund, or portion of a Fund that is directly managed by a sub-adviser (other than GMFCT), the Trustees of the Fund and GMFCT have delegated proxy voting authority to that sub-adviser. Each sub-adviser has provided its proxy voting policies to the Board of Trustees of the Fund and GMFCT for their respective review and these proxy voting policies are described below. Each sub-adviser is required (1) to represent quarterly to GMFCT that all proxies of the Fund(s) advised by this sub-adviser were voted in accordance with the sub-adviser's proxy voting policies as provided to GMFCT and (2) to confirm that there have been no material changes to the sub-adviser's proxy voting policies.
INSTITUTIONAL SHAREHOLDER SERVICES ("ISS")
1. AUDITORS
Vote FOR proposals to ratify auditors, unless any of the following apply:
o An auditor has a financial interest in or association with the company, and is therefore not independent
o Fees for non-audit services are excessive, or
o There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company's financial position.
2. BOARD OF DIRECTORS
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes on director nominees should be made on a CASE-BY-CASE basis, examining the following factors: independence of the board and key board committees, attendance at board meetings, corporate governance
provisions and takeover activity, long-term company performance, responsiveness to shareholder proposals, any egregious board actions, and any excessive non-audit fees or other potential auditor conflicts.
CLASSIFICATION/DECLASSIFICATION OF THE BOARD
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors annually.
INDEPENDENT CHAIRMAN (SEPARATE CHAIRMAN/CEO)
Vote on a CASE-BY-CASE basis shareholder proposals requiring that the positions of chairman and CEO be held separately. Because some companies have governance structures in place that counterbalance a combined position, certain factors should be taken into account in determining whether the proposal warrants support. These factors include the presence of a lead director, board and committee independence, governance guidelines, company performance, and annual review by outside directors of CEO pay.
MAJORITY OF INDEPENDENT DIRECTORS/ESTABLISHMENT OF COMMITTEES VOTE FOR SHAREHOLDER PROPOSALS ASKING THAT A MAJORITY OR MORE OF DIRECTORS BE INDEPENDENT UNLESS THE BOARD COMPOSITION ALREADY MEETS THE PROPOSED THRESHOLD BY ISS'S DEFINITION OF INDEPENDENCE.
VOTE FOR SHAREHOLDER PROPOSALS ASKING THAT BOARD AUDIT, COMPENSATION, AND/OR NOMINATING COMMITTEES ARE COMPOSED EXCLUSIVELY OF INDEPENDENT DIRECTORS IF THEY CURRENTLY DO NOT MEET THAT STANDARD.
3. SHAREHOLDER RIGHTS
SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written consent.
Shareholder Ability to Call Special Meetings
Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.
SUPERMAJORITY VOTE REQUIREMENTS
Vote AGAINST proposals to require a supermajority shareholder vote.
VOTE FOR PROPOSALS TO LOWER SUPERMAJORITY VOTE REQUIREMENTS.
CUMULATIVE VOTING
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company's other governance provisions.
CONFIDENTIAL VOTING
Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents will not agree, the confidential voting policy is waived.
Vote FOR management proposals to adopt confidential voting.
4. PROXY CONTESTS
VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis, considering the factors that include the long-term financial performance, management's track record, qualifications of director nominees (both slates), and an evaluation of what each side is offering shareholders.
REIMBURSING PROXY SOLICITATION EXPENSES
Vote CASE-BY-CASE. Where ISS recommends in favor of the dissidents, we also recommend voting for reimbursing proxy solicitation expenses.
5. POISON PILLS
Vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals to redeem a company's poison pill and management proposals to ratify a poison pill.
6. MERGERS AND CORPORATE RESTRUCTURINGS
Vote CASE-BY-CASE on mergers and corporate restructurings based on such features as the fairness opinion, pricing, strategic rationale, and the negotiating process.
7. REINCORPORATION PROPOSALS
PROPOSALS TO CHANGE A COMPANY'S STATE OF INCORPORATION SHOULD BE EVALUATED ON A CASE-BY-CASE BASIS, GIVING CONSIDERATION TO BOTH FINANCIAL AND CORPORATE GOVERNANCE CONCERNS, INCLUDING THE REASONS FOR REINCORPORATING, A COMPARISON OF THE GOVERNANCE PROVISIONS, AND A COMPARISON OF THE JURISDICTIONAL LAWS. VOTE FOR REINCORPORATION WHEN THE ECONOMIC FACTORS OUTWEIGH ANY NEUTRAL OR NEGATIVE GOVERNANCE CHANGES.
8. CAPITAL STRUCTURE
COMMON STOCK AUTHORIZATION
Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis using a model developed by ISS.
Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being delisted or if a company's ability to continue to operate as a going concern is uncertain.
DUAL-CLASS STOCK
Vote AGAINST proposals to create a new class of common stock with superior voting rights.
Vote FOR proposals to create a new class of nonvoting or subvoting common stock if:
o It is intended for financing purposes with minimal or no dilution to current shareholders
o It is not designed to preserve the voting power of an insider or significant shareholder
9. EXECUTIVE AND DIRECTOR COMPENSATION
Votes with respect to compensation plans should be determined on a CASE-BY-CASE basis. Our methodology for reviewing compensation plans primarily focuses on the transfer of shareholder wealth (the dollar cost of pay plans to shareholders instead of simply focusing on voting power dilution). Using the expanded compensation data disclosed
under the SEC's rules, ISS will value every award type. ISS will include in its analyses an estimated dollar cost for the proposed plan and all continuing plans. This cost, dilution to shareholders' equity, will also be expressed as a percentage figure for the transfer of shareholder wealth, and will be considered long with dilution to voting power. Once ISS determines the estimated cost of the plan, we compare it to a company-specific dilution cap.
Vote AGAINST equity plans that explicitly permit repricing or where the company has a history of repricing without shareholder approval.
MANAGEMENT PROPOSALS SEEKING APPROVAL TO REPRICE OPTIONS Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following:
o Historic trading patterns
o Rationale for the repricing
o Value-for-value exchange
o Option vesting
o Term of the option
o Exercise price
o Participation
EMPLOYEE STOCK PURCHASE PLANS
Votes on employee stock purchase plans should be determined on a CASE-BY-CASE basis. Vote FOR employee stock purchase plans where all of the following apply:
o Purchase price is at least 85 percent of fair market value
o Offering period is 27 months or less, and
o Potential voting power dilution is ten percent or less.
Vote AGAINST employee stock purchase plans where any of the opposite conditions obtain.
SHAREHOLDER PROPOSALS ON COMPENSATION
Vote on a CASE-BY-CASE basis for all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.
10. SOCIAL AND ENVIRONMENTAL ISSUES
These issues cover a wide range of topics, including consumer and public safety, environment and energy, general corporate issues, labor standards and human rights, military business, and workplace diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.
APPENDIX C
PORTFOLIO MANAGER
INVESTMENTS IN THE FUND
Dollar Range of Investments in the
Name of Portfolio Manager Fund Name Fund as of October 31, 2006
------------------------- --------- ---------------------------
Joseph Cerniglia Gartmore Hedged Core Equity Fund None
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DESCRIPTION OF COMPENSATION STRUCTURE
Gartmore Mutual Funds Capital Trust ("GMFCT"):
GMFCT uses a compensation structure that is designed to attract and retain high-caliber investment professionals. Portfolio managers are compensated based primarily on the scale and complexity of their portfolio responsibilities and the total return performance of mutual funds, other managed pooled vehicles and managed separate accounts over which they have responsibility, versus appropriate peer groups and benchmarks. Portfolio manager compensation is reviewed annually and may be modified at any time as appropriate to adjust the factors used to determine bonuses or other compensation components.
Each portfolio manager is paid a base salary that GMFCT believes is industry competitive in light of the portfolio manager's experience and responsibility. In addition, each portfolio manager is eligible to receive an annual cash bonus that is derived from both quantitative and non-quantitative factors. Quantitative factors include fund/account performance and the financial performance of GMFCT or its parent company. The performance of the investment companies and other accounts each portfolio manager manages has a paramount impact on such person's compensation. For equity funds, pre-tax performance is measured, on a one-year basis, for each of the previous three calendar years, as compared to each such fund's or account's stated benchmark index. Pre-tax investment performance of most fixed-income portfolio managers is measured against a fund's stated benchmark over various time periods (e.g., on a one- or three-year basis, etc.). Additionally, mutual fund performance is measured against industry peer group rankings, which may provide performance rankings for both shorter periods as well as blended rankings for longer term performance. GMFCT uses this dual approach in order to create incentives for portfolio managers to sustain favorable results from one year to the next, and to reward managers for performance that has improved considerably during the recent period. Less significant in annual compensation determinations are subjective factors as identified by GMFCT's Chief Investment Officer or such other managers as may be appropriate.
The bonus determination components apply on an aggregate basis with respect to all accounts managed by a particular portfolio manager, including unregistered pooled investment vehicles and separate investment advisory accounts. The compensation of portfolio managers with other job responsibilities (such as managerial, providing analytical support for other accounts, etc.) will include consideration of the scope of such responsibilities and the managers' performance in meeting them. Funds and accounts that have performance-based advisory fees are not accorded disproportionate weightings in measuring aggregate portfolio manager performance.
Annual bonuses may vary significantly from one year to the next based on all of these factors. High performing portfolio managers may receive annual bonuses that constitute a substantial portion of their respective total compensation.
Portfolio managers also may be awarded unregistered restricted equity interests in a related NWD Investments entity that typically vest over time and are designed to create incentives to retain key talent and they are eligible to participate in a non-qualified deferred compensation plan sponsored by Nationwide Mutual Life Insurance Company, GMFCT's ultimate parent company. Such plan affords participating U.S.-based employees the
tax benefits of deferring the receipt of a portion of their cash compensation. Portfolio managers also may participate in benefit plans and programs available generally to all GMFCT employees.
OTHER MANAGED ACCOUNTS
The following chart summarizes information regarding accounts other than the Fund for which the portfolio manager has day-to-day management responsibilities. Accounts are grouped into the following three categories: (1) mutual funds; (2) other pooled investment vehicles; and (3) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is provided separately.
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Number of Accounts Managed by Each Portfolio Manager and Total
Name of Portfolio Manager Assets by Category as of October 31, 2006
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Joseph Cerniglia Mutual Funds: 5 accounts, $461,070,089 total assets
(Other Pooled Investment
Vehicles: 5 accounts, $2,846,752,535 total assets
Other Accounts: 1 account, $480,000 total assets
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POTENTIAL CONFLICTS OF INTEREST
Gartmore Mutual Fund Capital Trust ("GMFCT"):
It is possible that conflicts of interest may arise in connection with the portfolio managers' management of the Funds on the one hand and other accounts for which the portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Fund and other accounts he advises. In addition, due to differences in the investment strategies or restrictions between the Fund and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Fund. In some cases, another account managed by the same portfolio manager may compensate GMFCT or its affiliates based on the performance of the portfolio held by that account. The existence of such a performance-based fee may create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, the portfolio manager will endeavor to exercise his discretion in a manner that he believes is equitable to all interested persons. The Trust has adopted policies that are designed to eliminate or minimize conflicts of interest, although there is no guarantee that procedures adopted under such policies will detect each and every situation in which a conflict arises.
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Amended and Restated Agreement and Declaration of Trust of the Trust, amended and restated as of October 28, 2004, previously filed with the Trust's registration statement on December 30, 2004 is hereby incorporated by reference.
(1) Amending Resolutions dated September 30, 2004 to the Agreement and Declaration of Trust, previously filed with the Trust's registration statement on February 28, 2005, are hereby incorporated by reference.
(2) Amending Resolutions dated December 2, 2004 to the Agreement and Declaration of Trust, previously filed with the Trust's registration statement on February 28, 2005, are hereby incorporated by reference.
(3) Amending Resolutions dated January 12, 2006 to the Agreement and Declaration of Trust, previously filed with the Trust's registration statement on February 28, 2006, are hereby incorporated by reference.
(4) Amending Resolutions dated June 14, 2006 to the Agreement and Declaration of Trust, previously filed with the Trust's registration statement on July 7, 2006, are hereby incorporated by reference.
(5) Amending Resolutions dated September 13, 2006 to the Agreement and Declaration of Trust, previously filed with the Trust's registration statement on September 26, 2006, are hereby incorporated by reference.
(b) Amended and Restated By-laws of the Trust amended and restated as of October 28, 2004, previously filed with the Trust's registration statement on December 30, 2004 is hereby incorporated by reference.
(c) Certificates for shares are not issued. Articles III, V, and VI of the Amended and Restated Agreement and Declaration of Trust, incorporated by reference to Exhibit (a) hereto, define rights of holders of shares.
(d) Investment Advisory Agreements
(1) Investment Advisory Agreement pertaining to series of the Trust currently managed by Gartmore Mutual Fund Capital Trust ("GMFCT") dated February 28, 2005, previously filed with the Trust's registration statement on February 28, 2006, is hereby incorporated by reference.
(a) Exhibit A to Investment Advisory Agreement amended
effective February 28, 2007, is filed herewith as Exhibit
23(d)(1)(a).
(b) Exhibit B to Investment Advisory Agreement effective July 1, 2005, previously filed with the Trust's registration statement on February 28, 2006, is hereby incorporated by reference.
(2) Investment Advisory Agreement pertaining to the series of the Trust managed by Gartmore Morley Capital Management, Inc. ("GMCM") dated February 28, 2005, previously filed with the Trust's registration statement on February 28, 2006, is hereby incorporated by reference.
(a) Exhibit A to Investment Advisory Agreement amended
effective February 28, 2007 is filed herewith as Exhibit
23(d)(2)(a).
(3) Subadvisory Agreements.
(a) Subadvisory Agreement pertaining to certain series of
the Trust among the Trust, GMFCT and NorthPointe
Capital, LLC for the Gartmore Large Cap Value,
Gartmore Value Opportunities, NorthPointe Small Cap
Value and NorthPointe Small Cap Growth Funds dated
February 28, 2005, previously filed with the Trust's
registration statement on February 28, 2006, is
hereby incorporated by reference.
(i) Exhibit A to Subadvisory Agreement amended
effective February 28, 2007, is filed herewith as
Exhibit 23(d)(3)(a)(i).
(b) Subadvisory Agreement pertaining to certain series of
the Trust among the Trust, GMFCT and BlackRock
Investment Management, LLC for Gartmore S&P 500
Index, Gartmore Small Cap Index, Gartmore Mid Cap
Market Index, Gartmore International Index and
Gartmore Bond Index Funds, effective September 29,
2006, previously filed with the Trust's registration
statement on December 14, 2006, is hereby
incorporated by reference.
(i) Exhibit A to Subadvisory Agreement amended
effective February 28, 2007, is filed herewith as
Exhibit 23(d)(3)(b)(i).
(c) Subadvisory Agreement pertaining to certain series of
the Trust among the Trust, GMFCT and Gartmore Global
Partners ("GGP") for the Gartmore China
Opportunities, Gartmore Emerging Markets, Gartmore
International Growth, Gartmore Worldwide Leaders, and
Gartmore Global Utilities Funds, effective September
29, 2006, previously filed with the Trust's
registration statement on December 14, 2006, is
hereby incorporated by reference.
(i) Exhibit A to Subadvisory Agreement amended
effective February 28, 2007 is filed herewith as
Exhibit 23(d)(3)(c)(i).
(e) (1) Underwriting Agreement dated February 28, 2005, previously
filed with the Trust's registration statement on February 28,
2006, is hereby incorporated by reference.
(a) Amended Schedule A to Underwriting Agreement, amended
effective February 28, 2007, is filed herewith as
Exhibit 23(e)(1)(a).
(2) Model Dealer Agreement, effective January 2007, is filed
herewith as Exhibit 23(e)(2).
(f) Not applicable.
(g) Custodian Agreement
(1) Custody Agreement dated April 4, 2003, Fund list amended as of
December 29, 2004, between the Trust and JPMorgan Chase Bank,
previously filed with the Trust's registration statement on
February 28, 2005, is hereby incorporated by reference.
(a) Fund List to Global Custody Agreement between
JPMorgan Chase Bank and the Trust, effective as of
February 28, 2007, is filed herewith as Exhibit
23(g)(1)(a).
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(2) Waiver to Global Custody Agreement dated as of February
28, 2005, between the Trust and JP Morgan Chase Bank,
previously filed with the Trust's registration statement
on February 282006, is hereby incorporated by reference.
(3) Cash Trade Execution Rider dated April 4, 2003, previously
filed with the Trust's registration statement on February
28, 2006, is hereby incorporated by reference.
(4) Special Custody Account Agreement dated as of September
28, 2006, among Citigroup Global Markets Inc., Gartmore
Hedged Core Equity and Gartmore Market Neutral Funds, and
JPMorgan Chase Bank, previously filed with the Trust's
registration statement on December 14, 2006, is hereby
incorporated by reference.
(5) Institutional Client Agreement dated September 28, 2006,
between Citigroup Global Markets Inc. and Gartmore Hedged
Core Equity and Gartmore Market Neutral Funds, previously
filed with the Trust's registration statement on December
14, 2006, is hereby incorporated by reference.
(h) (1) Fund Administration and Transfer Agency Agreement
between the Trust, Gartmore SA Capital Trust and Gartmore
Investor Services, Inc., as amended and restated effective
January 1, 2005, previously filed with the Trust's
registration statement on December 28, 2004, is hereby
incorporated by reference.
(a) Amendment to Amended and Restated Fund Administration and
Transfer Agency Agreement between the Trust, Gartmore SA
Capital Trust and Gartmore Investor Services, Inc.,
effective as of February 28, 2005 and previously filed
with the Trust's registration statement on February 28,
2006, is hereby incorporated by reference
(b) Exhibit C (Fee Schedule) to Fund Administration and
Transfer Agency Agreement, amended effective February 28,
2007, is filed herewith as Exhibit 23(h)(1)(b).
(2) (a) Administrative Services Plan, amended effective February
28, 2007, is filed herewith as Exhibit 23(h)(2)(a).
(b) Form of Servicing Agreement to Administrative Services
Plan ("Servicing Agreement"), effective January 2007,
is filed herewith as Exhibit 23(h)(2)(b).
(3) Expense Limitation Agreement between the Trust and GMFCT
relating to the Gartmore Mid Cap Growth, Gartmore Mid Cap
Growth Leaders, Gartmore Money Market, Gartmore Small Cap
Leaders, Gartmore China Opportunities, Gartmore Global Natural
Resources, each of the Gartmore Optimal Allocations Funds,
Gartmore Emerging Markets, Gartmore International Growth,
Gartmore Worldwide Leaders, Gartmore Global Financial
Services, Gartmore Global Utilities, Gartmore Hedged Core
Equity, Gartmore Small Cap Growth Opportunities, Gartmore
Small Cap Value, Gartmore Small Cap Core, Gartmore Market
Neutral and Gartmore U.S. Growth Leaders Long-Short Funds
effective February 28, 2007, is filed herewith as Exhibit
23(h)(3).
(4) Expense Limitation Agreement between the Trust and Gartmore
Morley Capital Management, Inc. ("GMCM") relating to the
Gartmore Enhanced Income Fund effective February 28, 2007, is
filed herewith as Exhibit 23(h)(4).
(5) Expense Limitation Agreement between the Trust and GMCM
relating to the Gartmore Short Duration Bond Fund effective
February 28, 2007, is filed herewith as Exhibit 23(h)(5).
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(6) Expense Limitation Agreement between the Trust and GMFCT
relating to the Gartmore Large Cap Value, Gartmore Global
Technology and Communications, Gartmore Global Health
Sciences, NorthPointe Small Cap Value, Gartmore Value
Opportunities, Gartmore U.S. Growth Leaders, Gartmore
Nationwide Leaders, Gartmore Micro Cap Equity, Gartmore S&P
500 Index, Gartmore Small Cap Index, Gartmore Mid Cap Market
Index, Gartmore International Index, Gartmore Bond Index and
each of the Investor Destinations Funds effective February 28,
2007, is filed herewith as Exhibit 23(h)(6).
(7) Expense Limitation Agreement between the Trust, GMFCT and
NorthPointe Capital, LLC relating to the NorthPointe Small Cap
Growth Fund effective February 28, 2007, is filed herewith as
Exhibit 23(h)(7).
(8) Form of Fee Waiver Agreement between the Trust, on behalf of
Gartmore U.S. Growth Leaders Long-Short Fund, and GMFCT,
effective February 28, 2007, is filed herewith as Exhibit
23(h)(8).
(9) Form of Indemnification Agreement between the Trust and each
of its trustees and certain of its officers, previously filed
with the Trust's registration statement on February 28, 2005,
is hereby incorporated by reference. Specific agreements are
between the Trust and each of the following: Charles E. Allen,
Paula H. J. Cholmondeley, C. Brent DeVore, Phyllis Kay Dryden,
Barbara L. Hennigar, Barbara I. Jacobs, Douglas F. Kridler,
Michael D. McCarthy, Arden L. Shisler, David C. Wetmore,
Michael A. Krulikowski, and Gerald J. Holland.
(10) Assignment and Assumption Agreement between Gartmore Mutual
Funds, an Ohio business trust ("OBT") and Gartmore Mutual
Funds, a Delaware statutory trust ("DST"), dated February 28,
2005, assigning GMF OBT's title, rights, interests, benefits
and privileges in and to certain contracts listed in the
Agreement, previously filed with the Trust's registration
statement on February 28, 2006, is hereby incorporated by
reference.
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(i) Legal Opinion of Stradley Ronon Stevens & Young, LLP is filed herewith as Exhibit 23(i).
(j) Consent of PricewaterhouseCoopers LLP ("PwC"), independent auditors, is filed herewith as Exhibit 23(j).
(k) Not applicable.
(l) Not applicable.
(m) Amended Distribution Plan under Rule 12b-1 effective February 28, 2007, is filed herewith as Exhibit 23(m).
(n) Amended Rule 18f-3 Plan effective February 28, 2007, is filed herewith as Exhibit 23(n).
(o) Not applicable.
(p) (1) Code of Ethics for Gartmore Funds, previously filed with the Trust's registration statement on February 28, 2006, is hereby incorporated by reference.
(2) Code of Ethics for Gartmore Mutual Fund Capital Trust, Gartmore SA Capital Trust, NorthPointe Capital, LLC, NWD MRT, Gartmore Morley Capital Management, Inc. and Gartmore Trust Company as initially adopted on August 8, 2000 and amended effective July 1, 2001, November 29, 2001, December 31, 2001 and February 1, 2005, previously filed with the Trust's registration statement on February 28, 2006, is hereby incorporated by reference.
(3) Code of Ethics for Gartmore Distribution Services, Inc dated February 1, 2005, previously filed with the Trust's registration statement on February 28, 2006, is hereby incorporated by reference.
(4) (a) Gartmore Global Partners Code of Ethics dated March 2004, previously filed with the Trust's registration statement on February 28, 2006, is hereby incorporated by reference.
(b) Gartmore Global Partners Personal Securities Trading Guidelines - Charlotte and New York dated March 2000, previously filed with the Trust's registration statement on October 13, 2000, is hereby incorporated by reference.
(c) Gartmore Global Partners Personal Securities Trading Guidelines - London and Tokyo dated March 2000, previously filed with the Trust's registration statement on October 13, 2000, is hereby incorporated by reference.
(d) Gartmore Global Partners Personal Dealing (Personal Securities Transactions) dated March 2000, previously filed with the Trust's registration statement on October 13, 2000, is hereby incorporated by reference.
(q) (1) Powers of Attorney with respect to the Trust for Charles E.
Allen, Paula H. J. Cholmondeley, C. Brent DeVore, Phyllis Kay
Dryden, Barbara L. Hennigar, Barbara I. Jacobs, Douglas F.
Kridler, Michael D. McCarthy, Arden L. Shisler, and David C.
Wetmore are filed herewith as Exhibit 23(q)(1).
(2) Power of Attorney with respect to the Trust for John H. Grady and Gerald J. Holland is filed herewith as Exhibit 23(q)(2).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is presently controlled by or under common control with Registrant.
ITEM 25. INDEMNIFICATION
The Trust has entered into indemnification agreements with each of the trustees and certain of its officers. The indemnification agreements provide that the Trust will indemnify the indemnitee for and against any and all judgments, penalties, fines, and amounts paid in settlement, and all expenses actually and reasonably incurred by indemnitee in connection with a proceeding that the indemnitee is a party to or is threatened to be made a party to (other than certain exceptions specified in the agreements), to the maximum extent not expressly prohibited by Delaware law or applicable federal securities law and regulations (including without limitation Section 17(h) of the 1940 Act and the rules and regulations issued with respect thereto by the U.S. Securities and Exchange Commission). The Trust also will indemnify indemnitee for and against all expenses actually and reasonably incurred by indemnitee in connection with any proceeding to which indemnitee is or is threatened to be made a witness but not a party. See Item 23(h)(9) above.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to 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 director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such 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 issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Gartmore Mutual Fund Capital Trust, ("GMFCT"), an investment adviser of the Trust, also serves as investment adviser to the Gartmore Variable Insurance Trust. Except as stated below, the Directors of NWD Investment Management, Inc., (formerly Gartmore Global Investments, Inc.), GMFCT's managing unitholder have not been engaged in any other business or profession of a substantial nature during the past two fiscal years other than in their capacities as a director or officer of NWD Investment Management affiliates:
John H. Grady, President and Chief Executive Officer of GMFCT, was Chief Executive Officer of Constellation Investment Management Co., L.P. (registered investment adviser), and President and Chief Executive Officer of Constellation Funds Group (registered investment companies) from March 2004 until March 2006. Mr. Grady also was President of Constellation Investment Distribution Co., Inc. (registered broker-dealer) from March 2004 until June 2006.
(b) Each of the following persons serves in the same or similar capacity with one or more affiliates of GMFCT. The address for the persons listed below is 1200 River Road, Suite 1000, Conshohocken, Pennsylvania 19428.
Name Position with GMFCT Position with Registrant
John H. Grady President President
Gerald J. Holland Senior Vice President and Treasurer and CFO
Chief Operating Officer
Eric E. Miller Senior Vice President, Secretary
General Counsel and
Assistant Secretary
Michael A. Krulikowski Vice President and Chief Assistant Secretary and
Compliance Officer Chief Compliance Officer
Gerald T. Nichols Senior Vice President, n/a
Head of Fixed Income
Patrick J. Udovich Senior Vice President n/a
Douglas Castagna Senior Vice President-US n/a
Head of Finance and
Accounting and Treasurer
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(b) GMCM serves as investment adviser to the Gartmore Short Duration Bond Fund and Gartmore Enhanced Income Fund. GMCM is incorporated under the laws of the State of Oregon and is a wholly owned indirect subsidiary of NWD Investment Management, Inc. To the knowledge of the investment advisor, none of the directors or officers of GMCM, except as set forth below, is or has been at any time during the past two fiscal years engaged in any other business, profession, vocation or employment of a substantial nature, except that certain directors and officers also hold various positions with and engage in business for Morley Financial Services, Inc. and NWD Investment Management, Inc. The directors except as noted below may be contacted c/o Morley Financial Services, Inc., 5665 SW Meadows Road, Suite 400 Lake Oswego, Oregon 97035.
Jill R. Cuniff, Managing Director and Chief Investment Officer, and Director of GMCM. Ms. Cuniff is also Managing Director, Chief Investment Officer and Director of Morley Financial Services, Inc.
(c) Information for the Subadviser of the S&P 500 Index Fund, Gartmore Small Cap Index Fund, Gartmore Mid Cap Market Index Fund, Gartmore Bond Index Fund and Gartmore International Index Fund.
(1) BlackRock Investment Management LLC, ("BlackRock") acts as subadviser to the Funds listed above and as adviser or subadviser to a number of other registered investment companies. The list required by this Item 25 of officers and directors of BlackRock, together with information as to their other business, profession, vocation or employment of a substantial nature during the past two fiscal years, is incorporated by reference to Schedule A and D of Form ADV filed by BlackRock (SEC file No. 801-12485).
(d) Information for the Subadviser of the Gartmore Emerging Markets Fund, Gartmore International Growth Fund, Gartmore Worldwide Leaders Fund (formerly Gartmore Global Leaders Fund), Gartmore Global Utilities Fund and Gartmore China Opportunities Fund.
(1) Gartmore Global Partners ("Gartmore") acts as subadviser to the Gartmore Emerging Markets Fund, Gartmore International Growth Fund, Gartmore Worldwide Leaders Fund (formerly Gartmore Global Leaders Fund), Gartmore Global Utilities Fund and Gartmore China Opportunities Fund as well as adviser to certain other clients. The list required by this Item 25 of officers and directors of Gartmore, together with information as to their other business, profession, vocation or employment of a substantial nature during the past two years, is incorporated by reference to Schedules A and D of Form ADV filed by Gartmore (SEC File No. 801-48811).
(e) Information for the Subadviser of the Gartmore Value Opportunities Fund, Gartmore Large Cap Value Fund, NorthPointe Small Cap Value Fund and NorthPointe Small Cap Growth Fund.
(1) NorthPointe Capital, LLC ("NorthPointe") acts as subadviser to the Gartmore Value Opportunities Fund, Gartmore Large Cap Value Fund, NorthPointe Small Cap Value Fund and NorthPointe Small Cap Growth Fund and separate institutional investors. The list required by this Item 25 of officers and directors of NorthPointe, together with information as to their other business, profession, vocation or employment of a substantial nature during the past two years, is incorporated by reference to Schedules A and D of Form ADV filed by NorthPointe (SEC File No. 801-57064).
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Gartmore Distribution Services, Inc. ("GDSI"), the principal underwriter of the Registrant, also acts as principal underwriter for Gartmore Variable Insurance Trust and Gartmore Mutual Funds II, Inc.
(b) Herewith is the information required by the following table with respect to each director, officer or partner of GDSI:
Name: Address: Title with GDSI: Title with
Registrant:
John H. Grady 1200 River Road President President and Chief
Conshohocken, PA 19428 Executive Officer
Gerald J. Holland 1200 River Road Senior Vice President, Chief Treasurer
Conshohocken PA 19428 Administrative Officer
Eric E. Miller 1200 River Road Senior Vice President, General Secretary
Conshohocken PA 19428 Counsel, U.S.
Michael A. Krulikowski 1200 River Road Vice President and Assistant Secretary
Conshohocken PA 19428 Chief Compliance Officer and Chief
Compliance Officer
Patrick Udovich 1200 River Road Senior Vice President, Human n/a
Conshohocken, PA 19428 Resources
William Baltrus 1200 River Road Vice President, Administration n/a
Conshohocken, PA 19428
Joanne McGoldrick One Nationwide Plaza Associate Vice President and n/a
Columbus, OH 43215 Secretary
Douglas Castagna 1200 River Road Senior Vice President and n/a
Conshohocken, PA 19428 Assistant Treasurer
Craig Stokarski 1200 River Road Financial Operations Principal n/a
Conshohocken, PA 19428
Robert A. Rosholt One Nationwide Plaza Director n/a
Columbus, OH 43215
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(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
BISYS
3435 Stelzer Road
Columbus, OH 43219
Gartmore Funds
1200 River Road, Suite 1000
Conshohocken, PA 19428
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, Gartmore Mutual Funds (a Delaware Statutory Trust) certifies that it meets all the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment Nos. 86, 87 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Conshohocken, and Commonwealth of Pennsylvania, on this 28th day of February, 2007.
GARTMORE MUTUAL FUNDS
By: /s/ Allan J. Oster ----------------------------------------------- Allan J. Oster, Attorney-In-Fact for Registrant |
PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, THIS POST-EFFECTIVE AMENDMENT NOS. 86, 87 TO THE REGISTRATION STATEMENT OF GARTMORE MUTUAL FUNDS HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE 28TH DAY OF FEBRUARY, 2007.
Signature & Title
Principal Executive Officer
/s/ John H. Grady* ----------------------------------------------------- John H. Grady, President and Chief Executive Officer |
Principal Accounting and Financial Officer
/s/ Gerald J. Holland*
------------------------------------------------------
Gerald J. Holland, Treasurer
/s/ Charles E. Allen*
------------------------------------------------------
Charles E. Allen, Trustee
/s/ Paula H.J. Cholmondeley*
------------------------------------------------------
Paula H.J. Cholmondeley, Trustee
/s/ C. Brent Devore*
------------------------------------------------------
C. Brent Devore, Trustee
/s/ Phyllis Kay Dryden*
------------------------------------------------------
Phyllis Kay Dryden, Trustee
/s/ Barbara L. Hennigar*
------------------------------------------------------
Barbara L. Hennigar, Trustee
/s/ Barbara I. Jacobs*
------------------------------------------------------
Barbara I. Jacobs, Trustee
/s/ Douglas F. Kridler*
-----------------------------------------------------
Douglas F. Kridler, Trustee
/s/ Michael D. McCarthy*
------------------------------------------------------
Michael D. McCarthy, Trustee
/s/ Arden L. Shisler*
------------------------------------------------------
Arden L. Shisler, Trustee
/s/ David C. Wetmore*
------------------------------------------------------
David C. Wetmore, Trustee and Chairman
*BY: /s/ Allan J. Oster
---------------------------------------
Allan J. Oster, Attorney-In-Fact
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EXHIBITS INDEX
EXHIBITS EXHIBIT NO.
Exhibit A to Investment Advisory Agreement with GMFCT EX-23(d)(1)(a)
Exhibit A to Investment Advisory Agreement with GMCM EX-23(d)(2)(a)
Exhibit A to Subadvisory Agreement with NorthPointe EX-23(d)(3)(a)(i)
Exhibit A to Subadvisory Agreement with BlackRock EX-23(d)(3)(b)(i)
Exhibit A to Subadvisory Agreement with GGP EX-23(d)(3)(c)(i)
Amended Schedule A to Underwriting Agreement EX-23(e)(1)(a)
Model Dealer Agreement EX-23(e)(2)
Fund List to Global Custody Agreement EX-23(g)(1)(a)
Amended Exhibit C to Fund Administration and Transfer Agency Agreement EX-23(h)(1)(b)
Administrative Services Plan EX-23(h)(2)(a)
Form of Servicing Agreement EX-23(h)(2)(b)
Expense Limitation Agreement (Mid-Cap Growth) EX-23(h)(3)
Expense Limitation Agreement (Enhanced Income) EX-23(h)(4)
Expense Limitation Agreement (Short Duration Bond) EX-23(h)(5)
Expense Limitation Agreement (Large Cap Value) EX-23(h)(6)
Expense Limitation Agreement (NorthPointe) EX-23(h)(7)
Form of Fee Waiver Agreement EX-23(h)(8)
Legal Opinion of Stradley Ronon Stevens & Young, LLP EX-23(i)
Consent of Pricewaterhouse Coopers LLC EX-23(j)
Amended Distribution Plan EX-23(m)(2)
Amended Rule 18f-3 Plan EX-23(n)
Power of Attorney EX-23(q)(1)
Power of Attorney EX-23(q)(2)
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EXHIBIT A EX-99(d)(1)(a)
Investment Advisory Agreement
Between Gartmore Mutual Funds and
Gartmore Mutual Fund Capital Trust
Amended, January 11, 2007
to be effective February 28, 2007
Funds of the Trust Advisory Fees
Gartmore Nationwide Fund 0.60% on assets up to $250 million
(formerly Gartmore Total Return Fund) 0.575% on assets of $250 million and more but less than $1 billion
Gartmore Growth Fund 0.55% on assets of $1 billion and more but less than $2 billion
(formerly Nationwide Growth Fund) 0.525% on assets of $2 billion and more but less than $5 billion
0.50% for assets of $5 billion and more
Gartmore Value Opportunities Fund 0.70% on assets up to $250 million
(formerly Nationwide Value Opportunities Fund) 0.675% on assets of $250 million and more but less than $1 billion
0.65% on assets of $1 billion and more but less than $2 billion
0.625% on assets of $2 billion and more but less than $5 billion
0.60% for assets of $5 billion and more
Gartmore Mid Cap Growth Leaders 0.80% on assets up to $250 million
(formerly Millennium Growth Fund and 0.77% on assets of $250 million and more but less than $1 billion
Nationwide Mid Cap Growth Fund) 0.74% on assets of $1 billion and more but less than $2 billion
0.71% on assets of $2 billion and more but less than $5 billion
0.68% for assets of $5 billion and more
Gartmore Global Technology and 0.88% on assets up to $500 million
Communications Fund(1) 0.83% on assets of $500 million and more but less than $2 billion
(formerly Nationwide Global Technology 0.78% for assets of $2 billion and more
and Communications Fund)
Gartmore Global Health Sciences Fund(1) 0.90% on assets up to $500 million
(formerly Nationwide Global Life 0.85% on assets of $500 million and more but less than $2 billion
Sciences Fund) 0.80% for assets of $2 billion and more
Gartmore U.S. Growth Leaders Fund(2) 0.90% on assets up to $500 million
(formerly Nationwide Focus Fund and 0.80% on the next $1.5 billion in assets
Gartmore Growth 20 Fund) 0.75% on assets of $2 billion and more
Gartmore Nationwide Leaders Fund(1) 0.80% on assets up to $500 million
(formerly Gartmore U.S. Leaders Fund) 0.70% on the next $2 billion in assets
0.65% on assets of $2 billion or more
Gartmore Micro Cap Equity Fund 1.25% of the Fund's average daily net assets
Gartmore Mid Cap Growth Fund 0.75% on assets up to $250 million
0.725% on assets of $250 million and more but less than $1 billion
0.70% on assets of $1 billion and more but less than $2 billion
0.675% on assets of $2 billion and more but less than $5 billion
0.65% for assets of $5 billion and more
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Investment Advisory Agreement
Between Gartmore Mutual Funds and
Gartmore Mutual Fund Capital Trust
Amended, January 11, 2007
to be effective February 28, 2007
Page 2
Funds of the Trust Advisory Fees
Gartmore Small Cap Leaders Fund 0.95% of the Fund's average daily net assets
Gartmore U.S. Growth Leaders 1.50% on assets up to $250 million
Long-Short Fund 1.25% on assets of $250 million and more
Gartmore China Opportunities Fund(1) 1.25% on assets up to $500 million
1.20% on assets of $500 million and more but less than $2 billion
1.15% on assets of $2 billion and more
Gartmore Global Natural Resources Fund(1) 0.70% on assets up to $500 million
0.65% on assets of $500 million and more but less than $2 billion
0.60% on assets of $2 billion and more
Gartmore Optimal 0.15% of the Fund's average daily net assets
Allocations Fund:
Growth (formerly Gartmore Optimal Allocations
Fund: Aggressive)
Gartmore Optimal 0.15% of the Fund's average daily net assets
Allocations Fund: Moderate Growth
(formerly Gartmore Optimal Allocations Fund:
Moderately Aggressive)
Gartmore Optimal 0.15% of the Fund's average daily net assets
Allocations Fund:
Moderate (formerly Gartmore Actively
Managed Moderate Asset Allocation Fund)
Gartmore Optimal 0.15% of the Fund's average daily net assets
Allocations Fund:
Specialty (formerly Gartmore Actively
Managed Specialty Asset Allocation Fund)
Gartmore Optimal Allocations Fund: 0.15% of the Fund's average daily net assets
Defensive
NorthPointe Small Cap Value Fund 0.85% of the Fund's average daily net assets
NorthPointe Small Cap Growth Fund 0.95% of the Fund's average daily net assets
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Investment Advisory Agreement
Between Gartmore Mutual Funds and
Gartmore Mutual Fund Capital Trust
Amended, January 11, 2007
to be effective February 28, 2007
Page 3
Funds of the Trust Advisory Fees
Gartmore Bond Fund 0.50% on assets up to $250 million
(formerly Nationwide Bond Fund) 0.475% on assets of $250 million and more but less than $1 billion
Gartmore Tax-Free Income Fund 0.45% on assets of $1 billion and more but less than $2 billion
(formerly Nationwide Tax Free Income Fund) 0.425% on assets of $2 billion and more but less than $5 billion
Gartmore Government Bond Fund 0.40% for assets of $5 billion and more
(formerly Nationwide Government
Bond Fund)
Gartmore Money Market Fund 0.40% on assets up to $1 billion
(formerly Nationwide Money 0.38% on assets of $1 billion and more but less than $2 billion
Market Fund) 0.36% on assets of $2 billion and more but less than $5 billion
0.34% for assets of $5 billion and more
Gartmore S&P 500 Index Fund 0.13% on assets up to $1.5 billion
(formerly Nationwide S&P 500 Index 0.12% on assets of $1.5 billion and more but less than $3 billion Fund)
0.11% on assets of $3 billion and more but less than $4.5 billion
0.10% on assets of $4.5 billion and more
Gartmore Small Cap Index Fund 0.20% on assets up to $1.5 billion
(formerly Nationwide Small Cap Index 0.19% on assets of $1.5 billion and more but less than $3 billion
Fund) 0.18% on assets of $3 billion and more
Gartmore Mid Cap Market Index Fund 0.22% on assets up to $1.5 billion
(formerly Nationwide Mid Cap 0.21% on assets of $1.5 billion and more but less than $3 billion
Market Index Fund) 0.20% on assets of $3 billion and more
Gartmore International Index Fund 0.27% on assets up to $1.5 billion
(formerly Nationwide International Index 0.26% on assets of $1.5 billion and more but less than $3 billion
Fund) 0.25% on assets of $3 billion and more
Gartmore Bond Index Fund 0.22% on assets up to $1.5 billion
(formerly Nationwide Bond Index Fund) 0.21% on assets of $1.5 billion and more but less than $3 billion
0.20% on assets of $3 billion and more
Gartmore Large Cap Value Fund 0.75% on assets up to $100 million
(formerly Prestige Large Cap 0.70% on assets of $100 million and more
Value Fund and Nationwide
Large Cap Value Fund)
|
Investment Advisory Agreement
Between Gartmore Mutual Funds and
Gartmore Mutual Fund Capital Trust
Amended, January 11, 2007
to be effective February 28, 2007
Page 4
Funds of the Trust Advisory Fees
Gartmore Small Cap Fund 0.95% on assets up to $100 million
(formerly Nationwide Small Cap Fund 0.80% on assets of $100 million and more
and Prestige Small Cap Fund)
Gartmore Investor Destinations Aggressive Fund 0.13% of average daily net assets
(formerly Investor Destinations Aggressive Fund and
Nationwide Investor Destinations Aggressive Fund)
Gartmore Investor Destinations Moderately Aggressive Fund
(formerly Investor Destinations Moderately Aggressive Fund and
Nationwide Investor Destinations Moderately Aggressive Fund)
Gartmore Investor Destinations Moderate Fund
(formerly Investor Destinations Moderate Fund and
Nationwide Investor Destinations Moderate Fund)
Gartmore Investor Destinations Moderately Conservative Fund
(formerly Investor Destinations Moderately Conservative Fund and
Nationwide Investor Destinations Moderately Conservative Fund)
Gartmore Investor Destinations Conservative Fund
(formerly Investor Destinations Conservative Fund and
Nationwide Investor Destinations Conservative Fund)
Gartmore Hedged Core Equity Fund 1.25% of average daily net assets
Gartmore Small Cap Growth Opportunities Fund 0.95% on assets up to $500 million
0.85% on assets of $500 million and more but less than $2
billion
0.80% for assets of $2 billion and more
Gartmore Small Cap Value Fund 0.95% on assets up to $500 million
0.85% on assets of $500 million and more but less than $2
billion
0.80% for assets of $2 billion and more
Gartmore Small Cap Core Fund 0.85% on assets up to $500 million
0.75% on assets of $500 million and more but less than $2
billion
0.70% for assets of $2 billion and more
Gartmore Market Neutral Fund 1.25% of average daily net assets
|
Investment Advisory Agreement
Between Gartmore Mutual Funds and
Gartmore Mutual Fund Capital Trust
Amended, January 11, 2007
to be effective February 28, 2007
Page 5
Funds of the Trust Advisory Fees
Gartmore Emerging Markets Fund(1) 1.05% on assets up to $500 million
1.00% on assets of $500 million and more but less than $2
billion
0.95% for assets of $2 billion and more
Gartmore International Growth Fund(1) 0.90% on assets up to $500 million
0.85% on assets of $500 million and more but less than $2 billion
0.80% for assets of $2 billion and more
Gartmore Worldwide Leaders Fund(1) 0.90% on assets up to $500 million
0.85% on assets of $500 million and more but less than $2 billion
0.80% for assets of $2 billion and more
Gartmore Global Financial Services Fund(1) 0.90% on assets up to $500 million
0.85% on assets of $500 million and more but less than $2 billion
0.80% for assets of $2 billion and more
Gartmore Global Utilities Fund(1) 0.70% on assets up to $500 million
0.65% on assets of $500 million and more but less than $2 billion
0.60% for assets of $2 billion or more
|
1 Performance Fees for the Gartmore Technology and Communications Funds; Gartmore Global Health Sciences Fund; Gartmore Nationwide Leaders Fund; Gartmore China Opportunities Fund; Gartmore Global Natural Resources Fund; Gartmore Global Financial Services Fund; Gartmore Global Utilities Fund; Gartmore International Growth Fund; Gartmore Emerging Markets Fund; and Gartmore Worldwide Leaders Fund.
The base advisory fee for each of these Funds, as set forth above, is adjusted each quarter beginning one year after implementation of the Performance Fee, depending upon a Fund's investment performance for the 12 months preceding the end of that month relative to the investment performance of each respective Fund's benchmark as listed below. The base fee is either increased or decreased proportionately by the following amounts at each breakpoint, based upon whether a Fund has out-performed or under-performed its respective benchmark (using the performance of each such Fund's Class A Shares to measure), by more or less than a maximum of 500 basis points over the preceding rolling 12 month period as follows:
+/- 100 bps under/outperformance 2bps +/- 200 bps under/outperformance 4bps +/- 300 bps under/outperformance 6bps +/- 400 bps under/outperformance 8bps +/- 500 bps or more under/outperformance 10bps |
The investment performance of each Fund will be the sum of: (1) the change in each Fund's value during such period; (2) the value of the Fund's cash distributions (from net income and realized net gains) having an ex-dividend date during such calculation period; and (3) the value of any capital gains taxes paid or accrued during such calculation period for undistributed realized long-term capital gains from the Fund. For this purpose, the value of distributions per share of realized capital gains, of dividends per share paid from investment income and of capital gains taxes per share reinvested in the Fund will be the Fund's value in effect at the close of business on the record date for the payment of such distributions and the date on which provision is made for such taxes, after giving effect to such distribution, dividends and taxes.
Benchmark Index Performance:
The performance of each respective benchmark Index for a calculation period,
expressed as a percentage of each Index, at the beginning of such period will be
the sum of: (1) the change in the level of the Index during such period; and (2)
the value, as calculated consistent with the Index, of cash distributions having
an ex-dividend date during such period made by those companies whose securities
comprise the Index. For this purpose, cash distributions on the securities that
comprise the Index will be treated as if they were reinvested in the Index at
least as frequently as the end of each calendar quarter following payment of the
dividend.
Benchmark Indices:
1. Gartmore Global Technology and Communications Fund Goldman Sachs Technology Composite Index
2. Gartmore Global Health Sciences Fund Goldman Sachs Health Care Index
3. Gartmore Nationwide Leaders Fund S&P 500 Index
4. Gartmore China Opportunities Fund MSCI Zhong Hua Index
5. Gartmore Global Natural Resources Fund Goldman Sachs Natural Resources Index
6. Gartmore Emerging Markets Fund MSCI Emerging Markets Index
7. Gartmore International Growth Fund MSCI All Country World Free ex U.S. Index
8. Gartmore Worldwide Leaders Fund MSCI World Index
9. Gartmore Global Financial Services Fund MSCI World Financial Index
10. Gartmore Global Utilities Fund 60% MSCI World Telecom Service Index/40% MSCI
World Utilities Index
|
2 Performance fee for the Gartmore U.S. Growth Leaders Fund
The base advisory fee listed above is adjusted each quarter, beginning one year after commencement of operations, depending on the Fund's investment performance for the 36 months preceding the end of that month, relative to the investment performance of the Fund's benchmark, the S&P 500 Index. The base fee is either increased or decreased by the following amounts at each breakpoint, based on whether the Fund has out- or under-performed the S&P 500 Index by more or less than 1200 basis points over the preceding rolling 36 month period:
For assets up to $500 million +/- 22 basis points Next $1.5 billion in assets +/- 18 basis points Assets of $2 billion and more +/- 16 basis points |
The investment performance of the Gartmore U.S. Growth Leaders Fund will be the sum of: (1) the change in the Fund's value during such period; (2) the value of the Fund's cash distributions (from net income and realized net gains) having an ex-dividend date during such calculation period; and (3) the value of any capital gains taxes paid or accrued during such calculation period for undistributed realized long-term capital gains from the Fund. For this purpose, the value of distributions per share of realized capital gains, of dividends per share paid from investment income and of capital gains taxes per share reinvested in the Fund at the Fund's value in effect at the close of business on the record date for the payment of such distributions and dividends and the date on which provision is made for such taxes, after giving effect to such distribution, dividends and taxes.
S&P 500 Index Performance:
The performance of the S&P 500 Index for a calculation period, expressed as a
percentage of S&P 500 Index, at the beginning of such period will be the sum of:
(1) the change in the level of the S&P 500 Index during such period; and (2) the
value, as calculated consistent with the S&P 500 Index, of cash distributions
having an ex-dividend date during such period made by those companies whose
securities comprise the S&P 500 Index. For this purpose, cash distributions on
the securities that comprise the S&P 500 Index will be treated as if they were
reinvested in the S&P 500 Index at least as frequently as the end of each
calendar quarter following payment of the dividend.
TRUST
GARTMORE MUTUAL FUNDS
Title:
ADVISER
GARTMORE MUTUAL FUND CAPITAL TRUST
Title:
EX-99(d)(2)(a)
EXHIBIT A
Investment Advisory Agreement
Between Gartmore Mutual Funds
and Gartmore Morley Capital Management, Inc.
Amended, January 11, 2006 to be effective February 28, 2007
Funds of the Trust Advisory Fees (applicable for each Fund)
------------------ ----------------------------------------
Gartmore Short Duration Bond Fund 0.35% on assets up to $500 million
(formerly Morley Capital Accumulation Fund) 0.34% on assets of $500 million and more but less than $1 billion
0.325% on assets of $1 billion and more but less than $3 billion
0.30% on assets of $3 billion and more but less than $5 billion
0.285% on assets of $5 billion and more but less than $10 billion
0.275% for assets of $10 billion and more
Gartmore Enhanced Income Fund 0.35% on assets up to $500 million
(formerly Gartmore Morley Enhanced Income Fund) 0.34% on assets of $500 million and more but less than $1 billion
0.325% on assets of $1 billion and more but less than $3 billion
0.30% on assets of $3 billion and more but less than $5 billion
0.285% on assets of $5 billion and more but less than $10 billion
0.275% for assets of $10 billion and more
|
EX-99(d)(3)(a)(i)
EXHIBIT A
SUBADVISORY AGREEMENT
BETWEEN
GARTMORE MUTUAL FUNDS,
GARTMORE MUTUAL FUND CAPITAL TRUST
AND
NORTHPOINTE CAPITAL, LLC
Effective February 28, 2007*
Funds of the Trust Advisory Fees
Gartmore Large Cap Value Fund 0.35% on Subadvisor Assets up to
$100 million
0.30% for Subadvisor Assets of $100 million or more
Gartmore Value Opportunities Fund 0.70% on Subadvisor Assets up to $250 million
0.675% on SubadvisorAssets of $250 million and
more but less than $1 billion
0.65% on Subadvisor Assets of $1 billion and more but
less than $2 billion
0.625% on Subadvisor Assets of $2
billion and more but less than $5 billion
0.60% for Subadvisor Assets of $5
billion or more
NorthPointe Small Cap Value Fund 0.85% of the Fund's average daily net assets
NorthPointe Small Cap Growth Fund 0.95% of the Fund's average daily net assets
|
*As most recently approved at the January 11, 2007 Board Meeting.
TRUST
GARTMORE MUTUAL FUNDS
By: _________________________
Name:
Title:
ADVISER
GARTMORE MUTUAL FUND CAPITAL TRUST
By: _____________________________
Name:
Title:
SUBADVISER
NORTHPOINTE CAPITAL LLC
By: _____________________________
Name:
Title:
EX-99(d)(3)(b)(i)
EXHIBIT A
SUBADVISORY AGREEMENT
BETWEEN
GARTMORE MUTUAL FUND CAPITAL TRUST
GARTMORE MUTUAL FUNDS
AND BLACKROCK INVESTMENT MANAGEMENT, LLC
Effective February 28, 2007*
Funds of the Trust Advisory Fees
Gartmore S&P 500 Index Fund (a) on assets up to $1.5 billion, 0.02% of the Fund's average
daily net assets;
(b) on assets from $1.5 billion up to $3 billion, 0.015% of
the Fund's average daily net assets; and
(c) on assets of $3 billion or more, 0.0125% of the Fund's
average daily net assets
Gartmore Small Cap Index Fund (a) on assets up to $1.5 billion, 0.07% of the Fund's average
daily net assets;
(b) on assets from $1.5 billion up to $3 billion, 0.06% of
the Fund's average daily net assets; and
(c) on assets of $3 billion and more, 0.05% of the Fund's
average daily net assets
Gartmore Mid Cap Market Index Fund (a) on assets up to $1.5 billion, 0.075% of the Fund's
average daily net assets;
(b) on assets from $1.5 billion up to $3 billion, 0.06% of
the Fund's average daily net assets, and
(c) on assets of $3 billion or more, 0.05% of the Fund's
average daily net assets
Gartmore International Index Fund (a) on assets up to $1.5 billion, 0.11% of the Fund's average
daily net assets;
(b) on assets from $1.5 billion up to $3 billion, 0.085% of
the Fund's average daily net assets; and
(c) on assets of $3 billion or more, 0.075% of the Funds
average daily net assets
Gartmore Bond Index Fund (a) on assets up to $1.5 billion, 0.08% of the Fund's average
daily net assets;
(b) on assets from $1.5 billion up to $3 billion, 0.06% of
the Fund's average daily net assets; and
(c) on assets of $3 billion or more, 0.05% of the Fund's
average daily net assets
|
*As most recently approved at the January 11, 2007 Board Meeting.
TRUST
GARTMORE MUTUAL FUNDS
By: ________________________________________
Name:
Title:
ADVISER
GARTMORE MUTUAL FUND CAPITAL TRUST
By: _________________________________________
Name:
Title:
SUBADVISER
BLACKROCK INVESTMENT MANAGEMENT, LLC
By: _________________________________________
Name:
Title:
EX-99(d)(3)(c)(i)
EXHIBIT A
SUBADVISORY AGREEMENT
AMONG GARTMORE MUTUAL FUND CAPITAL TRUST,
GARTMORE MUTUAL FUNDS
AND GARTMORE GLOBAL PARTNERS
Effective February 28, 2007*
Funds of the Trust Advisory Fees
Gartmore China Opportunities Fund(1) 0.625% on assets up to $500 million
0.600% on assets of $500 million but less than $2 billion
0.575% on assets of $2 billion and more
Gartmore Emerging Markets Fund(1) 0.525% on assets up to $500 million
0.50% on assets of $500 million but less than $2 billion
0.475% on assets of $2 billion or more
Gartmore International Growth Fund(1) 0.45% on assets up to $500 million
0.425% on assets of $500 million but less than $2 billion
0.40% on assets of $2 billion or more
Gartmore Worldwide Leaders Fund(1) 0.45% on assets up to $500 million
0.425% on assets of $500 million but less than $2 billion
0.40% on assets of $2 billion or more
Gartmore Global Utilities Fund(1) 0.35% on assets up to $500 million
0.325% on assets of $500 million but less than $2 billion
0.30% on assets of $2 billion or more
|
* As most recently approved at the January 11, 2007 Board Meeting.
(1)Performance Fees for the Funds.
The base subadvisory fee for each of these Funds, as set forth above, is adjusted each quarter beginning one year after implementation of the Performance Fee, depending upon a Fund's investment performance for the 12 months preceding the end of that month relative to the investment performance of each respective Fund's benchmark as listed below. The base fee is either increased or decreased proportionately by the following amounts at each breakpoint, based upon whether a Fund has out-performed or under-performed its respective benchmark (using the performance of each such Fund's Class A Shares to measure), by more or less than a maximum of 500 basis points over the preceding rolling 12 month period as follows:
+/- 100 bps under/outperformance 2bps +/- 200 bps under/outperformance 4bps +/- 300 bps under/outperformance 6bps +/- 400 bps under/outperformance 8bps +/- 500 bps or more under/outperformance 10bps |
The investment performance of each Fund will be the sum of: (1) the change in each Fund's value during such period; (2) the value of the Fund's cash distributions (from net income and realized net gains) having an ex-dividend date during such calculation period; and (3) the value of any capital gains taxes paid or accrued during such calculation period for undistributed realized long-term capital gains from the Fund. For this purpose, the value of distributions per share of realized capital gains, of dividends per share paid from investment income and of capital gains taxes per share reinvested in the Fund will be the Fund's value in effect at the close of business on the record date for the payment of such distributions and the date on which provision is made for such taxes, after giving effect to such distribution, dividends and taxes.
Benchmark Index Performance: The performance of each respective benchmark Index for a calculation period, expressed as a percentage of each Index, at the beginning of such period will be the sum of: (1) the change in the level of the Index during such period; and (2) the value, as calculated consistent with the Index, of cash distributions having an ex-dividend date during such period made by those companies whose securities comprise the Index. For this purpose, cash distributions on the securities that comprise the Index will be treated as if they were reinvested in the Index at least as frequently as the end of each calendar quarter following payment of the dividend.
Benchmark Indices:
1. Gartmore China Opportunities Fund MSCI Zhong Hua Index
2. Gartmore Global Utilities Fund 60% MSCI World Telecom Index/40% MSCI World Utilities Index
3. Gartmore International Growth Fund MSCI All Country World Free X U.S.
Index
4. Gartmore Emerging Markets Fund MSCI Emerging Markets Index
5. Gartmore Worldwide Leaders Fund MSCI World Index
TRUST
GARTMORE MUTUAL FUNDS
Title:
ADVISER
GARTMORE MUTUAL FUND CAPITAL TRUST
Title:
Title:
EX-99(e)(1)(a)
Schedule A
Underwriting Agreement
between Gartmore Mutual Funds and
Gartmore Distribution Services, Inc.
Amended, January 11, 2007
to be effective February 28, 2007
Name of Fund
------------
Gartmore Nationwide Fund (formerly Gartmore Total Return Fund)
Gartmore Growth Fund (formerly Nationwide Growth Fund)
Gartmore Mid Cap Growth Leaders Fund (formerly Millennium Growth Fund, Nationwide New Economy Fund and Nationwide
Mid Cap Growth Fund)
Gartmore Bond Fund (formerly Nationwide Bond Fund)
Gartmore Tax-Free Income Fund (formerly Nationwide Tax-Free Income Fund)
Gartmore Government Bond Fund (formerly Nationwide Intermediate U.S. Government Bond Fund and Nationwide
Government Bond Fund)
Gartmore Money Market Fund (formerly Nationwide Money Market Fund)
Gartmore Large Cap Value Fund (formerly Prestige Large Cap Value Fund and
Nationwide Large Cap Value Fund)
Gartmore Small Cap Fund (formerly Nationwide Small Cap Fund and Prestige Small Cap Fund)
Gartmore Short Duration Bond Fund (formerly Morley Capital Accumulation Fund, Nationwide Morley Capital
Accumulation Fund and Gartmore Morley Capital Accumulation Fund)
Gartmore Enhanced Income Fund (formerly Gartmore Morley Enhanced Income Fund and
Morley Enhanced Income Fund)
Gartmore U.S. Growth Leaders Fund (formerly
Nationwide Focus Fund and Gartmore Growth 20 Fund)
Gartmore Value Opportunities Fund (formerly Nationwide Value Opportunities Fund)
Gartmore S&P 500 Index Fund(formerly Nationwide S&P 500 Index Fund)
Gartmore Small Cap Index Fund (formerly Nationwide Small Cap Index Fund)
Gartmore Mid Cap Market Index Fund (formerly
Nationwide Mid Cap Market Index Fund)
Gartmore International Index Fund (formerly Nationwide International Index Fund)
Gartmore Bond Index Fund (formerly Nationwide Bond Index Fund)
Gartmore Investor Destinations Aggressive Fund (formerly Investor Destinations Aggressive Fund and Nationwide
Investor Destinations Aggressive Fund)
Gartmore Investor Destinations Moderately Aggressive Fund (formerly Investor Destinations Moderately Aggressive
Fund and Nationwide Investor Destinations Moderately Aggressive Fund)
Gartmore Investor Destinations Moderate Fund (formerly Investor Destinations Moderate Fund and Nationwide
Investor Destinations Moderate Fund)
Gartmore Investor Destinations Moderately Conservative Fund (formerly Investor Destinations Moderately
Conservative Fund and Nationwide Investor Destinations Moderately Conservative Fund)
Gartmore Investor Destinations Conservative Fund (formerly Investor Destinations Conservative Fund and Nationwide
Investor Destinations Conservative Fund)
|
Schedule A Underwriting Agreement between Gartmore Mutual Funds and Gartmore Distribution Services, Inc.
Amended, January 11, 2007 to be effective February 28, 2007
NorthPointe Small Cap Value Fund
NorthPointe Small Cap Growth Fund
Gartmore Global Technology and Communications Fund (formerly Nationwide Global Technology and Communications Fund)
Gartmore Global Health Sciences Fund (formerly Nationwide Global Life Sciences Fund)
Gartmore Emerging Markets Fund
Gartmore International Growth Fund
Gartmore Worldwide Leaders Fund (formerly Gartmore Global Leaders Fund)
Gartmore Global Financial Services Fund
Gartmore Global Utilities Fund
Gartmore Nationwide Leaders Fund (formerly Gartmore U.S. Leaders Fund)
Gartmore Micro Cap Equity Fund
Gartmore Mid Cap Growth Fund
Gartmore U.S Growth Leaders Long-Short Fund (formerly Gartmore Long-Short Equity Plus Fund)
Gartmore China Opportunities Fund
Gartmore Global Natural Resources Fund
Gartmore Optimal Allocations Fund: Growth (formerly Gartmore Optimal Allocations Fund: Aggressive)
Gartmore Optimal Allocations Fund: Moderate Growth (formerly Gartmore Optimal Allocations Fund: Moderately
Aggressive)
Gartmore Optimal Allocations Fund: Moderate
Gartmore Optimal Allocations Fund: Specialty
Gartmore Optimal Allocations Fund: Defensive
Gartmore Small Cap Leaders Fund
Gartmore Hedged Core Equity Fund
Gartmore Small Cap Growth Opportunities Fund
Gartmore Small Cap Value Fund
Gartmore Small Cap Core Fund
Gartmore Market Neutral Fund
|
EX-99(e)(2)
DEALER AGREEMENT
AGREEMENT, made as of this th day of , 200_, by and between Gartmore Distribution Services, Inc., or its surviving entity ("Distributor") and _______________ ("Dealer") whereby Dealer agrees to participate in the distribution of the shares ("Shares") of the series and classes of Gartmore Mutual Funds (collectively the "Trust") as are listed on Exhibit A, and as may be amended from time to time (each, a "Fund"). Dealer also agrees to provide distribution and shareholder services to the Funds subject to the following terms and conditions.
1. DEALER AUTHORITY. With respect to the distribution and sales of Shares, Dealer shall have authority to act as limited agent of a Fund, Distributor or any other dealer only with respect to facilitating the purchase and sale of Shares as described herein. All orders are subject to acceptance or rejection by Distributor or a Fund in its sole discretion, and if accepted become effective only upon confirmation by Distributor. Dealer shall have no authority to make any representations concerning the Shares of a Fund except such representations as may be contained in a Fund's then current prospectus, in its then current Statement of Additional Information (collectively, the prospectus and Statement of Additional Information for each Fund are the "Prospectus"), and in such other printed information as a Fund or Distributor may subsequently prepare or distribute to Dealer for purposes of selling the Shares. Dealer shall have no authority to distribute any other sales material relating to a Fund or any of its Shares without the prior written approval of Distributor. Dealer agrees to follow any written guidelines or standards relating to the sale or distribution of the Shares as may be provided to Dealer by Distributor including the provisions outlined in Exhibit B and the relevant Fund's prospectus, as well as to follow any applicable federal and/or state securities laws, rules or regulations affecting the sale or distribution of shares of investment companies offering multiple classes of shares.
Dealer agrees to take full responsibility for the suitability and proper supervision of mutual fund recommendations to its customers and to ensure that, to the extent customers request a class of shares in a Fund different from what they already hold in the Fund, such customers are aware of the advantages and disadvantages of selecting one class of shares over other classes of shares and are aware of the available methods of mutual fund financing.
2. SALES AND PRICING OF SHARES. Dealer shall offer and sell Shares only at their respective public offering prices, or the net asset values if applicable, in accordance with Rule 22c-1 of the Investment Company Act of 1940, as amended, and the terms and conditions of the Prospectus of a Fund whose Shares Dealer offers. Dealer shall place orders for Shares only with Distributor, shall date and time stamp all orders received by Dealer and promptly shall transmit all orders to Distributor in time for processing at the price next determined after receipt of the order by Dealer, in accordance with the Prospectus of the Fund whose Shares
January 2007 1 I # 227207 v.1
EX-99(e)(2)
are being sold. Dealer shall not aggregate orders to purchase or redeem Shares received after close of the New York Stock Exchange (generally, 4:00 p.m. Eastern Time) ("Market Close") with orders received before Market Close, and warrants that its internal control structure concerning the processing and transmission of orders is suitably designed to prevent or detect on a timely basis orders received after Market Close from being aggregated with orders received before Market Close and to minimize errors that could result in late transmission of orders. Orders received by Dealer before Market Close will receive that day's public offering price or net asset value, as applicable, and orders received by Dealer after Market Close will receive the next day's public offering price or net asset value, as applicable. Dealer shall confirm the transaction with its customer (hereinafter "Client-shareholder") at the price confirmed in writing by the Distributor. In the event of differences between verbal and written price, written confirmations shall be considered final. Prices of the Shares are computed by a Fund in accordance with its Prospectus. Distributor will not accept any order from Dealer which is placed on a conditional basis or subject to any delay or contingency prior to execution.
3. SERVICES TO BE PROVIDED BY DEALER. Dealer or its affiliates/designees will maintain records of sales, redemptions and repurchases of Shares and will furnish the Distributor with such records on request. Dealer will also distribute Prospectuses and reports to the Client-shareholder as described below, in compliance with applicable legal requirements unless the parties expressly agree that Distributor will do so on Dealer's behalf. Client-shareholders means those customers of the Dealer who have entered into an agreement with the Dealer for brokerage, investment advisory, trust, or shareholder services and who maintain an interest in an account with the Funds registered in the name of the Dealer.
With respect to shareholder services, Distributor hereby appoints Dealer to render shareholder services to each of the 12b-1 Funds (as defined below). Shareholder services may include, but are not limited to, answering routine shareholder inquiries regarding the 12b-1 Funds; providing information to shareholders on their investments in the 12b-1 Funds; providing personnel and communication equipment used in connection therewith; and providing such other services as Distributor may reasonably request. Dealer shall prepare such quarterly reports for Distributor as shall reasonably be required by Distributor. Fees paid under this Agreement for such shareholder services for the 12b-1 Funds are in addition to, and not duplicative of, any fees paid for services provided under a separate administrative servicing agreement for the Funds.
Distributor reserves the right to reject any purchase orders, including exchanges, for any reason and without notice to Dealer, including if Distributor, in its sole opinion, believes Dealer's customer(s) is engaging in short-term or excessive trading into and out of a Fund or otherwise engaging in trading that may be disruptive to a Fund ("Market Timing"). Dealer agrees to cooperate with Distributor to monitor for Market Timing by Dealer's customers, to provide such relevant information about Market Timers to Distributor as it may reasonably request and to prevent Market Timing from occurring by or because of Dealer's customers. Failure of Distributor to reject any purchase orders that might be deemed to be Market Timing shall not constitute a waiver of Distributor's rights under this section.
January 2007 2 I # 227207 v.1
EX-99(e)(2)
4. DEALER COMPENSATION.
(a) So long as this Agreement is in effect, on purchases from Distributor of Shares of a Fund sold with a sales charge, Dealer shall receive a discount from the public offering price (a "Dealer Concession") at the specified percentages of the public offering price set forth in Exhibit A and the Fund's prospectus and which may be modified from time to time by a Fund.
Dealer shall not receive any Dealer Concession with respect to certain transactions which are exempt from sales charges and will receive the reduced Dealer Concessions which correspond to the reduced sales charges applicable to certain types of transactions (e.g., transactions involving letters of intent or rights of accumulation), as set forth in a Fund's Prospectus, which are hereby incorporated herein by reference and which may be modified from time to time by a Fund. Dealer shall not share or rebate any portion of such Dealer Concessions or otherwise grant any concessions, discounts or other allowances to any person who is not a broker or dealer actually engaged in the investment banking or securities business and is not a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"). Dealer will receive Dealer Concessions as described above on all purchase transactions in Client-shareholder accounts (excluding reinvestment of income dividends and capital gains distributions) for which Dealer is designated as Dealer of Record except where Distributor determines that any such purchase was made with the proceeds of a redemption or repurchase of Shares of a Fund whether or not the transaction constitutes the exercise of the exchange or conversion privilege.
(b) In addition to the compensation described in Section 4(a) above and subject to any limitations set forth in the NASD's Rules of Conduct, including without limitation Rule 2830, Distributor will pay Dealer, with respect to each of the Funds for which a Distribution Plan pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act"), is in place for such Shares and under which a fee may be paid to broker-dealers for providing distribution or shareholder services ("12b-1 Funds"), a monthly fee computed at the annual rate as described in Exhibit A and the Fund's prospectus. The fee will be paid for the period Shares of the 12b-1 Funds are held in accounts for which Dealer provides services as described in Section 3 above; provided, however, that any waiver of such fee by Distributor will apply likewise to Dealer and Distributor is obligated to pay such fee to Dealer only so long as the Distributor is reimbursed by such 12b-1 Funds for such fees.
(c) With respect to any provision regarding Dealer compensation in this
Section 4, if there is any conflict between a term of Exhibit A and a
term of the applicable Fund prospectus, the term of the prospectus in
effect at such time shall prevail.
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(d) If any Shares sold to Dealer under the terms of this Agreement are
repurchased by a Fund, or are tendered for redemption, within seven
business days after the date of Distributor's confirmation of the
original purchase by Dealer, Dealer shall promptly refund to
Distributor the full Dealer Concession received by Dealer pursuant to
Section 4(a) above or Distributor reserves the right to deduct such
amount from any current or future compensation due Dealer.
5. DEALER AUTHORIZATION. Dealer hereby authorizes Distributor to act as its agent in connection with all transactions in Client-shareholder accounts for which Dealer is designated as Dealer of Record. All designations of Dealer of Record and all authorizations of Distributor to act as Dealer's agent shall cease upon the termination of this Agreement or upon the Client-shareholders' instructions to transfer his or her account to another Dealer of Record.
6. PAYMENT FOR SHARES. Payment for all Fund Shares purchased from Distributor by Dealer shall be received by Distributor within the time period defined by agreed-upon normal settlement procedure after acceptance of Dealer's order. If such payment is not so received by the Distributor, the Distributor and the Fund(s) reserve the right, without notice, to immediately cancel the sale, or, at Distributor's option, to sell the Shares ordered by Dealer back to the Fund in which latter case, Distributor may hold Dealer responsible for any loss, suffered by Distributor or by the Fund resulting from Dealer's failure to make payment as described above.
7. PURCHASE OF SHARES. Dealer shall purchase Shares of the Fund only through Distributor or from the Client-shareholders in accordance with the terms of the Fund's prospectus. If Dealer purchases Shares from Distributor, Dealer agrees that all such purchases shall be made only to cover orders already received by Dealer from the Client-shareholders, or for Dealer's own bona fide investment without a view to resale. If Dealer purchases Shares from the Client-shareholders, Dealer agrees to pay such Client-shareholders the applicable net asset value per share less any contingent deferred sales charge or redemption fee that would be applicable if such Shares were then tendered for redemption in accordance with the applicable Prospectus ("Repurchase Price").
8. LIMITATION ON SALE OF SHARES. Dealer shall sell Shares only:
(a) to the Client-shareholders at the prices described in
Section 2 above; or
(b) to Distributor as agent for the Fund at the Repurchase Price. In such a sale to Distributor, Dealer may act either as principal for Dealer's own account or as agent for the Client-shareholder. If Dealer acts as principal for its own
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account in purchasing Shares for resale to Distributor, Dealer agrees to pay Client-shareholder not less than nor more than the Repurchase Price which Dealer received from Distributor. If Dealer acts as agent for the Client-shareholder in selling Shares to Distributor, Dealer agrees not to charge the Client-shareholder more than a fair commission for handling the transaction.
9. DEALER'S REPRESENTATIONS AND WARRANTIES. Dealer hereby represents and warrants to Distributor that:
(a) Dealer is willing and possesses the legal authority to provide the services contemplated by this Agreement without violation of applicable laws;
(b) Dealer is and shall remain throughout the term of this Agreement a member in good standing of the NASD and shall immediately notify Distributor should it cease to be a member of the NASD;
(c) Dealer is and shall remain throughout the term of this Agreement a broker-dealer and thus a "Financial Institution" as defined by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA Patriot Act) of 2001 (the "ACT"), duly and properly registered and qualified under all applicable laws, rules and regulations, including, but not limited to, all state and federal securities laws, rules and regulations, as may be necessary or appropriate for Dealer to perform and observe all of its duties, obligations and covenants set forth or contemplated by this Agreement;
(d) Dealer shall throughout the term of this Agreement comply with the requirements of all applicable laws including Title III of the ACT, rules and regulations, including, but not limited to, federal and state securities laws, the rules, regulations and orders of the Securities and Exchange Commission and the NASD, in performing and observing all of its duties, obligations and covenants set forth or contemplated by this Agreement;
(e) Dealer shall not withhold placing with Distributor orders received from the Client-shareholders so as to profit from such withholding;
(f) Dealer shall not offer Shares of any Fund in any state where such Shares are not qualified for sale under the Blue Sky Laws and Regulations of such state or where Dealer is not qualified to act as a dealer, except in appropriate circumstances when under state laws and regulations the Shares or the sales transactions are exempt from qualification or dealer registration is not required; and
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(g) Dealer shall give Distributor at least 30 days advance written notice of any event which will cause an assignment of this Agreement (as defined in the 1940 Act) by Dealer or its affiliates.
10. INDEMNIFICATION. Dealer shall indemnify and hold harmless Distributor, its affiliates and the Fund against any losses, claims, damages, liabilities or expenses (including reasonable attorneys' fees and expenses) resulting from (a) any negligence or misfeasance of Dealer or any of its officers, directors, employees or registered representatives; or (b) any violation of any law including Title III of the ACT, rule or regulation or any failure to perform or observe any obligations of Dealer set forth in this Agreement by Dealer or any of its officers, directors, employees or registered representatives.
Distributor shall indemnify and hold harmless Dealer and its affiliates against any losses, claims, damages, liabilities or expenses (including reasonable attorneys' fees and expenses) resulting from (a) any negligence or misfeasance of the Funds, Distributor or any of its officers, directors, employees or registered representatives; or (b) any violation of any law, rule or regulation or any failure to perform or observe any obligations of Distributor or the Funds set forth in this Agreement by the Funds, Distributor or any of its officers, directors, employees or registered representatives.
11. PROVISION OF SALES MATERIAL. Distributor shall deliver to Dealer without charge reasonable quantities of the Fund's Prospectuses with any supplements thereto currently in effect, copies of current shareholder reports of the Fund, proxy materials, and sales material issued by Distributor from time to time.
12. RULE 12B-1 AGREEMENT; TERMINATION. This Agreement is a related agreement under the Distribution Plan ("Rule 12b-1 Plan"), applicable for the 12b-1 Funds, as adopted pursuant to Rule 12b-1 under the 1940 Act. This Agreement may be terminated as to the payments made by the 12b-1 Funds under the Rule 12b-1 Plan at any time, without the payment of any penalty, by the vote of a majority of the members of the Board of Trustees of the Trust who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Rule 12b-1 Plan or in any related agreements to the Rule 12b-1 Plan ("Disinterested Trustees") or by a majority of the outstanding Shares, each with respect to a class of a 12b-1 Fund, upon delivery of written notice thereof to the parties to this Agreement.
This Agreement will terminate automatically in the event of its assignment as defined in the 1940 Act or upon termination of the Distributor's underwriting agreement with the Fund. In addition, either the Distributor or Dealer may terminate this Agreement upon at least 90 days written notice to the other party.
13. COMPLETE AGREEMENT. This Agreement supersedes and cancels any prior agreement with respect to the sale of Shares of a Fund as listed in
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Exhibit A, and may be amended at any time and from time to time by written agreement of the parties hereto, subject to the approval of the Board of Trustees of the Trust when applicable. Notwithstanding the foregoing, Distributor may amend or modify the Exhibits incorporated herein, as provided throughout this Agreement, by providing new exhibits to Dealer. However, such amendment shall only become effective and part of this Agreement and be considered binding upon Dealer upon Dealer's first sale of Shares under the new Exhibits.
14. CHOICE OF LAW. This Agreement shall be governed by and construed to be in accordance with substantive laws of the State of Delaware without reference to choice of law principles thereof and in accordance with the 1940 Act. In the case of any conflict, the 1940 Act shall control. Each party represents that the undersigned has authority to act, and to execute this Agreement, on behalf of such party.
15. NOTICES. All communications and notices to Distributor should be sent to the address below. Any communications or notice to Dealer shall be duly given if mailed or delivered to Dealer at the address specified by Dealer below.
16. NON-EXCLUSIVITY. Each of the parties acknowledges and agrees that this Agreement and the arrangement described herein are intended to be non-exclusive and that each of the parties is free to enter into similar agreements and arrangements with other entities.
17. PRIVACY PROGRAM. Each Party to this Agreement agrees to protect Customer Information (defined below) and to comply as may be necessary with requirements of the Gramm-Leach-Bliley Act, the relevant state and federal regulations pursuant thereto, including Regulation S-P, and state privacy laws.
(a) CUSTOMER INFORMATION. "Customer Information" means any information contained on an application of a customer ("Customer") of the Funds or other form and all nonpublic personal information about a Customer that a party receives from the other party. "Customer Information" includes, by way of example and not limitation, name, address, telephone number, social security number, date of birth and personal financial information.
(b) SAFEGUARDING CUSTOMER INFORMATION. The parties shall establish and maintain safeguards against the unauthorized access, destruction, loss, or alteration of Customer Information in their control, which are no less rigorous than those maintained by a party for its own information of a similar nature. In the event of any improper disclosure of any Customer Information, the party responsible for the disclosure will immediately notify the other party.
(c) SURVIVABILITY. The provisions of this Privacy Program Section shall survive the termination of the Agreement.
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18. ANTI-MONEY LAUNDERING PROGRAM.
(a) The Distributor will rely upon Dealer to establish a written Anti-Money Laundering Program (the "Program") to include policies, procedures, and controls that comply with the ACT and the Bank Secrecy Act of 1970 ("BSA"). Each party to this Agreement acknowledges, represents, and warrants that each party has adopted and implemented an Anti-Money Laundering Program that complies and will continue to comply with all aspects and requirements of the ACT, the BSA, and all other applicable anti-money laundering laws and regulations.
Upon request, Dealer shall promptly certify to having such Program that complies with and continues to comply with all aspects and requirements of the ACT, the BSA, and all other applicable federal, state and local anti-money laundering laws and regulations.
(b) The Dealer's Program shall include, and the Distributor shall rely upon, the Dealer's policies, procedures and controls to, among other things, (i) verify the identity (due diligence) of the Dealer's customers, (ii) maintain records of the information used to identify the Dealer's customer, (iii) determine if a Dealer's customer appears on lists of known or suspected terrorists or associated with known or suspected terrorist organizations (said customer hereinafter referred to as a "Prohibited Customer"), and (iv) to ensure that Prohibited Customers and foreign shell banks do not maintain investments in any Fund.
(c) The Dealer's Program shall also comply with the Customer Identification Program ("CIP") for customers who open accounts on or after October 1, 2003, and as such, shall among other matters provide for the release of customer information to law enforcement agencies, and the filing of Suspicious Activity Reports ("SARs"), as and if applicable, and in accordance with the ACT. In addition, the Dealer's Program also shall include procedures for fulfilling the currency reporting requirements of the ACT and the BSA, as and if applicable.
(d) The provisions of this Anti-Money Laundering section shall survive the termination of the Agreement.
19. SHAREHOLDER INFORMATION
19.1 AGREEMENT TO PROVIDE INFORMATION. Dealer agrees to provide the Fund, upon written request, the taxpayer identification number ("TIN"), if known, of any or all Shareholder(s) of the account and the amount, date, name or other identifier of any registered representative(s) associated with the Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Shares held through an account maintained by the Dealer during the period covered by the request.
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19.1.1 PERIOD COVERED BY REQUEST. Requests must set forth a specific period, not to exceed 12 months from the date of the request, for which transaction information is sought. A Fund may request transaction information older than 12 months from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.
19.1.2 FORM AND TIMING OF RESPONSE. Dealer agrees to transmit the requested information that is on its books and records to the Fund or its designee promptly, but in any event not later than five (5) business days, after receipt of a request. If the requested information is not on the Dealer's books and records, Dealer agrees to: (i) provide or arrange to provide the requested information from Shareholders who hold an account with an indirect intermediary; or (ii) if directed by the Fund, block further purchases of Fund Shares from such indirect intermediary. In such instance, Dealer agrees to inform the Fund whether it plans to perform (i) or (ii). Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to a Fund should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, an "indirect intermediary" has the same meaning as in SEC Rule 22c-2 under the Investment Company Act of 1940.
19.1.3 LIMITATIONS ON USE OF INFORMATION. The Fund agrees not to use the information received for marketing or any other similar purpose without the prior written consent of the Dealer.
19.2 AGREEMENT TO RESTRICT TRADING. Dealer agrees to execute written instructions from a Fund to restrict or prohibit further purchases or exchanges of Shares by a Shareholder that has been identified by such Fund as having engaged in transactions of the Fund's Shares (directly or indirectly through the Dealer's account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding Shares issued by the Fund.
19.2.1 FORM OF INSTRUCTIONS. Instructions must include the TIN, if known, and the specific restriction(s) to be executed. If the TIN is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates.
19.2.2 TIMING OF RESPONSE. Dealer agrees to execute instructions as soon as reasonably practicable, but not later than five business days after receipt of the instructions by the Dealer.
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19.2.3 CONFIRMATION BY DEALER. Dealer must provide written confirmation to the Fund that instructions have been executed. Dealer agrees to provide confirmation as soon as reasonably practicable, but not later than ten business days after the instructions have been executed.
19.3 DEFINITIONS. For purposes of this paragraph 19:
19.3.1 The term "Fund" includes the Distributor and a Fund's
transfer agent. The term does not include any
"excepted funds" as defined in SEC Rule 22c-2(b)
under the 1940 Act.
19.3.2 The term "Shares" means the interest of Shareholders
corresponding to the redeemable securities of record
issued by a Fund under the 1940 Act that are held by
the Dealer.
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19.3.3 The term "Shareholder" means the beneficial owner of
Shares, whether the Shares are held directly or by
the Dealer in nominee name.
19.3.4 The term "written" includes electronic writings and
facsimile transmissions.
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20. TERMINATION AND SURVIVAL. In the event that this Agreement is terminated under the terms and conditions described in such Agreement, the indemnification provision contained in this Agreement shall continue until the possibilities for damages or loss have expired.
21. ACCEPTANCE OF AGREEMENT. The parties may enter into this Agreement by executing this document. In addition, the Dealer's placement of an order or acceptance of payments of any kind after the Dealer's receipt of this Agreement shall constitute the Dealer's acceptance of this Agreement and, therefore, after such placement of an order or acceptance of payment, this Agreement shall be binding as between the parties as of the date of such order or payment.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers as of the day and year first written above.
DISTRIBUTOR, DEALER, Gartmore Distribution Services, Inc. _____________________________ 1200 River Road, Suite 1000 _____________________________ Conshohocken, PA 19428 _____________________________ __________________________________ ____________________________________ By: _____________________________ By: ________________________________ January 2007 11 I # 227207 v.1 |
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EXHIBIT A
Any and all Gartmore Funds' funds are available for sale. The Broker/ Dealer will receive the applicable 12b-1 fees and Dealer Concession, as described in "Essential Fund Sales Information for Broker Dealers", as such document may be amended from time to time upon notice by the Distributor, based on funds sold and class purchased as defined in the fund's prospectus.
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EXHIBIT B
FUND/SERV PROCESSING PROCEDURES
AND
MANUAL PROCESSING PROCEDURES
The purchase, redemption and settlement of Shares of a Fund will normally follow the Fund/SERV-Defined Contribution Clearance and Settlement Service ("DCCS") Processing Procedures below and the rules and procedures of the SCC Division of the National Securities Clearing Corporation ("NSCC") shall govern the purchase, redemption and settlement of Shares of the Funds through NSCC by the Dealer. In the event of equipment failure or technical malfunctions or the parties' inability to otherwise perform transactions pursuant to the FUND/SERV Processing Procedures, or the parties' mutual consent to use manual processing, the Manual Processing Procedures below will apply.
It is understood and agreed that, in the context of Section 22 of the 1940 Act and the rules and public interpretations thereunder by the staff of the Securities and Exchange Commission (SEC Staff), receipt by the Dealer of any Instructions from the Client-shareholder prior to the Close of Trade on any Business Day shall be deemed to be receipt by the Funds of such Instructions solely for pricing purposes and shall cause purchases and sales to be deemed to occur at the Share Price for such Business Day, except as provided in 4(c) of the Manual Processing Procedures. Each Instruction shall be deemed to be accompanied by a representation by the Dealer that it has received proper authorization from each Client-shareholder whose purchase, redemption, account transfer or exchange transaction is effected as a result of such Instruction.
FUND/SERV-DCCS PROCESSING PROCEDURES
1. On each business day that the New York Stock Exchange (the "Exchange") is open for business on which the Funds determine their net asset values ("Business Day"), the Distributor shall accept, and effect changes in its records upon receipt of purchase, redemption, exchange, account transfer and registration instructions from the Dealer electronically through Fund/SERV ("Instructions") without supporting documentation from the Client-shareholder. On each Business Day, the Distributor shall accept for processing any Instructions from the Dealer and shall process such Instructions in a timely manner.
2. Distributor shall perform any and all duties, functions, procedures and responsibilities assigned to it under this Agreement and as otherwise established by the NSCC. Distributor shall conduct each of the foregoing activities in a competent manner and in compliance with (a) all applicable laws, rules and regulations, including NSCC Fund/SERV-DCCS rules and procedures relating to Fund/SERV; (b) the then-current Prospectus of a Fund; and (c) any provision relating to Fund/SERV in any other agreement of the Distributor that would affect its duties and obligations pursuant to this Agreement.
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3. Confirmed trades and any other information provided by the Distributor to the Dealer through Fund/SERV and pursuant to this Agreement shall be accurate, complete, and in the format prescribed by the NSCC.
4. Trade, registration, and broker/dealer information provided by the Dealer to the Distributor through Fund/SERV and pursuant to this Agreement shall be accurate, complete and, in the format prescribed by the NSCC. All Instructions by the Dealer regarding each Fund/SERV Account shall be true and correct and will have been duly authorized by the registered holder.
5. For each Fund/SERV transaction, including transactions establishing a
Client-shareholder account with the Distributor, the Dealer shall
provide the Funds and the Distributor with all information necessary or
appropriate to establish and maintain each Fund/SERV transaction (and
any subsequent changes to such information), which the Dealer hereby
certifies is and shall remain true and correct. The Dealer shall
maintain documents required by the Funds to effect Fund/SERV
transactions. The Dealer certifies that all Instructions delivered to
Distributor on any Business Day shall have been received by the Dealer
from the Client-shareholder by the close of trading (generally 4:00
p.m. Eastern Time ("ET")) on the Exchange (the "Close of Trading") on
such Business Day and that any Instructions received by it after the
Close of Trading on any given Business Day will be transmitted to
Distributor on the next Business Day.
MANUAL PROCESSING PROCEDURES
1. On each Business Day, the Dealer may receive Instructions from the Client-shareholder for the purchase or redemption of shares of the Funds based solely upon receipt of such Instructions prior to the Close of Trading on that Business Day. Instructions in good order received by the Dealer prior to the close of trading on any given Business Day (generally, 4:00 p.m. ET (the "Trade Date") and transmitted to the Distributor by no later than 9:30 a.m. ET the Business Day following the Trade Date ("Trade Date plus One" or "TD+1"), will be executed at the NAV ("Share Price") of each applicable Fund, determined as of the Close of Trading on the Trade Date.
2. By no later than 6:00 p.m. ET on each Trade Date ("Price Communication Time"), the Distributor will use its best efforts to communicate to the Dealer via electronic transmission acceptable to both parties, the Share Price of each applicable Fund, as well as dividend and capital gain information and, in the case of funds that credit a daily dividend, the daily accrual for interest rate factor (mil rate), determined at the Close of Trading on that Trade Date.
3. As noted in Paragraph 1 above, by 9:30 a.m. ET on TD+1 ("Instruction Cutoff Time") and after the Dealer has processed all approved transactions, the Dealer will transmit to the Distributor via facsimile, telefax or electronic transmission or system-to-system, or by a method acceptable to the Dealer and the Distributor, a report (the "Instruction Report") detailing the Instructions that were received by the Dealer prior to the Funds' daily determination of Share Price for each Fund (i.e., the Close of Trading) on Trade Date.
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(a) It is understood by the parties that all Instructions from the Client-shareholder shall be received and processed by the Dealer in accordance with its standard transaction processing procedures. The Dealer or its designees shall maintain records sufficient to identify the date and time of receipt of all Client-shareholder transactions involving the Funds and shall make or cause to be made such records available upon reasonable request for examination by the Funds or its designated representative or, at the request of the Funds, by appropriate governmental authorities. Under no circumstances shall the Dealer change, alter or modify any Instructions received by it in good order.
(b) Following the completion of the transmission of any Instructions by the Dealer to the Distributor by the Instruction Cutoff Time, the Dealer will verify that the Instruction was received by the Distributor and trades are pending by utilizing a remote terminal or such other method acceptable to the Distributor.
(c) In the event that an Instruction transmitted by the Dealer on any Business Day is not received by the Distributor by the Instruction Cutoff Time, due to mechanical difficulties or for any other reason beyond the Dealer's reasonable control, such Instruction shall nonetheless be treated by the Distributor as if it had been received by the Instruction Cutoff Time, provided that the Dealer retransmits such Instruction by facsimile transmission to the Distributor and such Instruction is received by the Distributor's financial control representative no later than 9:30 a.m. ET on TD+1. In addition, the Dealer will place a phone call to a financial control representative of the Distributor prior to 9:00 a.m. ET on TD+1 to advise the Distributor that a facsimile transmission concerning the Instruction is being sent.
(d) With respect to all Instructions, the Distributor's financial control representative will manually adjust a Fund's records for the Trade Date to reflect any Instructions sent by the Dealer.
(e) By no later than 4:00 p.m. on TD+1, and based on the information transmitted to the Distributor pursuant to Paragraph 3(c) above, the Dealer will use its best efforts to verify that all Instructions provided to the Distributor on TD+1 were accurately received and that the trades for each Account were accurately completed and the Dealer will use its best efforts to notify Distributor of any discrepancies.
4. As set forth below, upon the timely receipt from the Dealer of the Instructions, the Fund will execute the purchase or redemption transactions (as the case may be) at the Share Price for each Fund computed as of the Close of Trading on the Trade Date.
(a) Except as otherwise provided herein, all purchase and redemption transactions will settle on TD+1. Settlements will be through net Federal Wire transfers to an account designated by a Fund. In the case of Instructions which constitute a net purchase order, settlement shall occur by the Dealer
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instructing the trustee or custodian for the Funds to initiate a wire transfer by 1:00 p.m. ET on TD+1 to the custodian for the Fund for receipt by the Funds' custodian by no later than the Close of Business at the New York Federal Reserve Bank on TD+1, causing the remittance of the requisite funds to the Distributor to cover such net purchase order. In the case of Instructions which constitute a net redemption order, settlement shall occur by the Distributor causing the remittance of the requisite funds to cover such net redemption order by Federal Funds Wire by 1:00 p.m. ET on TD+1, provided that the Fund reserves the right to (i) delay settlement of redemptions for up to seven (7) Business Days after receiving a net redemption order in accordance with Section 22 of the 1940 Act and Rule 22c-1 thereunder, or (iii) suspend redemptions pursuant to the 1940 Act or as otherwise required by law. Settlements shall be in U.S. dollars and a Fund may pay redemption proceeds in whole or in part by a distribution in-kind of readily marketable securities that it holds in lieu of cash in conformity with applicable law or regulations.
(b) The Dealer or such other party as may be designated, as record owner of each account ("Record Owner") will be provided with all written confirmations required under federal and state securities laws.
(c) On any Business Day when the Federal Reserve Wire Transfer System is closed, all communication and processing rules will be suspended for the settlement of Instructions. Instructions will be settled on the next Business Day on which the Federal Reserve Wire Transfer System is open. The original TD+1 Settlement Date will not apply. Rather, for purposes of this Paragraph 4(c) only, the Settlement Date will be the date on which the Instruction settles.
(d) The Dealer shall, upon receipt of any confirmation or statement concerning the accounts, promptly verify by use of the terminal or by such other method acceptable to the Distributor and the Dealer the accuracy of the information contained therein against the information contained in the Dealer's internal record-keeping system and shall promptly, but in no event not more than SEVEN days, advise the Distributor in writing of any discrepancies between such information. The Distributor and the Dealer shall cooperate to resolve any such discrepancies as soon as reasonably practicable.
INDEMNIFICATION
In the event of any error or delay with respect to both the Fund/SERV Processing
Procedures and the Manual Processing Procedures outlined in Exhibit B herein:
(i) which is caused by the Funds or the Distributor, the Distributor shall make
any adjustments on the Funds' accounting system necessary to correct such error
or delay and the responsible party or parties shall reimburse the
Client-shareholder and the Dealer, as appropriate, for any losses or reasonable
costs incurred directly as a result of the error or delay but specifically
excluding any and all consequential punitive or other indirect damages or (ii)
which is caused by the Dealer or by any Client-shareholder, the Distributor
shall make any adjustment on the Funds' accounting system necessary to correct
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such error or delay and the affected party or parties shall be reimbursed by the Dealer for any losses or reasonable costs incurred directly as a result of the error or delay, but specifically excluding any and all consequential punitive or other indirect damages. In the event of any such adjustments on the Funds' accounting system, Dealer shall make the corresponding adjustments on its internal record-keeping system. In the event that errors or delays with respect to the Procedures are contributed to by more than one party hereto, each party shall be responsible for that portion of the loss or reasonable cost which results from its error or delay. All parties agree to provide the other parties prompt notice of any errors or delays of the type referred to herein and to use reasonable efforts to take such action as may be appropriate to avoid or mitigate any such costs or losses.
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FUND LIST
to
GLOBAL CUSTODY AGREEMENT
BETWEEN
JPMORGAN CHASE BANK AND
GARTMORE MUTUAL FUNDS
DATED APRIL 4, 2003
Amended, January 11, 2007
to be effective February 28, 2007
Fund Name
Gartmore Short Duration Bond Fund (formerly Gartmore Morley Capital Accumulation
Fund)
Gartmore Large Cap Value Fund
Gartmore Small Cap Fund (formerly Nationwide Small Cap Fund)
Gartmore Nationwide Fund
Gartmore Growth Fund
Gartmore Mid Cap Growth Leaders Fund (formerly Gartmore Millennium Growth Fund)
Gartmore S&P 500 Index Fund (formerly Nationwide S&P 500 Index Fund)
Gartmore Money Market Fund
Gartmore Bond Fund
Gartmore Tax-Free Income Fund
Gartmore Government Bond Fund
Gartmore Value Opportunities Fund
NorthPointe Small Cap Value Fund
Gartmore U.S. Growth Leaders Fund
Gartmore Global Technology and Communications Fund
Gartmore Emerging Markets Fund
Gartmore International Growth Fund
Gartmore Worldwide Leaders Fund
Gartmore Global Health Sciences Fund
Gartmore Global Financial Services Fund
Gartmore Gartmore Global Utilities Fund
Gartmore Nationwide Leaders Fund
Gartmore Enhanced Income Fund (formerly Gartmore Morley Enhanced Income Fund)
Gartmore Micro Cap Equity Fund
Gartmore Mid Cap Growth Fund
Gartmore Small Cap Index Fund (formerly Nationwide Small Cap Index Fund)
Gartmore International Index Fund (formerly Nationwide International
Index Fund)
Gartmore Bond Index Fund (formerly Nationwide Bond Index Fund)
Gartmore Mid Cap Market Index Fund (formerly Nationwide Mid Cap Market Index
Fund)
Gartmore Investor Destinations Aggressive Fund
Gartmore Investor Destinations Moderately Aggressive Fund
Gartmore Investor Destinations Moderate Fund
Gartmore Investor Destinations Moderately Conservative Fund
Gartmore Investor Destinations Conservative Fund
Gartmore U.S. Growth Leaders Long-Short Fund (formerly Gartmore Long-Short
Equity Plus Fund)
Gartmore China Opportunities Fund
Gartmore Global Natural Resources Fund
Gartmore Optimal Allocations Fund: Growth (formerly Gartmore Optimal Allocations
Fund:
Aggressive)
Gartmore Optimal Allocations Fund: Moderate Growth (formerly Gartmore Optimal
Allocations Fund: Moderately Aggressive)
Gartmore Optimal Allocations Fund: Moderate (formerly Actively Managed Moderate
Asset Allocation Fund)
Gartmore Optimal Allocations Fund: Specialty (formerly Actively Managed
Specialty Asset Allocation Fund)
Gartmore Optimal Allocations Fund: Defensive
NorthPointe Small Cap Growth Fund
Gartmore Small Cap Leaders Fund
Gartmore Hedged Core Equity Fund
Gartmore Small Cap Growth Opportunities Fund
Gartmore Small Cap Value Fund
Gartmore Small Cap Core Fund
Gartmore Market Neutral Fund
EX-99(h)(1)(b)
EXHIBIT C
GARTMORE MUTUAL FUNDS
Fund Administration and Transfer Agency Agreement
AMENDED, January 11, 2007
to be effective February 28, 2007
FEE SCHEDULE
FEES
The Trust shall pay fees to the Administrator and Transfer Agent, as set forth in the schedule directly below, for the provision of services covered by this Agreement. Fees will be computed daily and payable monthly at an annual rate based on the aggregate amount of the Trust's average daily net assets. The Trust will also be responsible for out-of-pocket expenses (including, but not limited to, the cost of the pricing services that the Administrator utilizes and any networking fees paid as out-of-pocket expenses) reasonably incurred by the Administrator and the Transfer Agent in providing services to the Trust. All fees and expenses shall be paid by the Trust to the Administrator on behalf of the Administrator and the Transfer Agent.
AGGREGATE* FEE AS A
TRUST ASSET LEVEL# PERCENTAGE OF NET ASSETS
-----------------------------------------------------------
Up to $1 billion 0.26%
$1 billion up to $3 billion 0.19%
$3 billion up to $4 billion 0.15%
$4 billion up to $5 billion 0.08%
$5 billion up to $10 billion 0.05%
$10 billion up to $12 billion 0.03%
$12 billion or more 0.02%
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* Includes fund administration and transfer agency services. # The assets of each of the Investor Destinations Funds (listed below) are excluded from the Trust asset level amount in order to calculate this asset based fee. The Investor Destinations Funds do not pay any part of this fee.
FUNDS OF THE TRUST
Gartmore Nationwide Fund
(formerly Gartmore Total Return Fund)
Gartmore Growth Fund
(formerly Nationwide Growth Fund)
Gartmore Mid Cap Growth Leaders Fund
(formerly Gartmore Millennium Growth Fund and Nationwide Mid Cap Growth
Fund)
Gartmore Bond Fund
(formerly Nationwide Bond Fund)
Gartmore Tax-Free Income Fund
(formerly Nationwide Tax-Free Income Fund)
# 192337 v. 4
EX-99(h)(1)(b)
Gartmore Government Bond Fund
(formerly Nationwide Intermediate U.S. Government Bond Fund
and Nationwide U.S. Government Bond Fund)
Gartmore Money Market Fund
(formerly Nationwide Money Market Fund)
Gartmore Value Opportunities Fund
(formerly Nationwide Value Opportunities Fund)
Gartmore U.S. Growth Leaders Fund
(formerly Nationwide Focus Fund and
Gartmore Growth 20 Fund)
Gartmore Short Duration Bond Fund
(formerly Morley Capital Accumulation Fund,
Nationwide Morley Capital Accumulation Fund and Gartmore Morley Capital
Accumulation Fund)
Gartmore Enhanced Income Fund
(formerly Gartmore Morley Enhance Income Fund and Morley Enhanced
Income Fund)
Gartmore Global Technology and Communications Fund
(formerly Nationwide Global Technology and Communications Fund)
Gartmore Global Health Sciences Fund
(formerly Nationwide Global Life Sciences Fund)
NorthPointe Small Cap Value Fund
NorthPointe Small Cap Growth Fund
Gartmore International Growth Fund
Gartmore Worldwide Leaders Fund
(formerly Gartmore Global Leaders Fund)
Gartmore Emerging Markets Fund
Gartmore Global Financial Services Fund
Gartmore Global Utilities Fund
Gartmore Nationwide Leaders Fund (formerly Gartmore U.S. Leaders Fund)
Gartmore Small Cap Index Fund (formerly Nationwide Small Cap Index Fund)
Gartmore International Index Fund (formerly Nationwide International Index Fund)
Gartmore Bond Index Fund (formerly Nationwide Bond Index Fund)
Gartmore Mid Cap Market Index Fund (Nationwide Mid Cap Market Index Fund)
Gartmore S&P 500 Index Fund (formerly Nationwide S&P 500 Index Fund)
Gartmore Large Cap Value Fund
(formerly Prestige Large Cap Value Fund and
Nationwide Large Cap Value Fund)
Gartmore Small Cap Fund (formerly Nationwide Small Cap Fund and
Prestige Small Cap Fund)
Gartmore Investor Destinations Aggressive Fund
(formerly Investor Destinations Aggressive Fund and
Nationwide Investor Destinations Aggressive Fund)
Gartmore Investor Destinations Moderately Aggressive Fund
(formerly Investor Destinations Moderately Aggressive Fund and
Nationwide Investor Destinations Moderately Aggressive Fund)
# 192337 v. 4
EX-99(h)(1)(b)
Gartmore Investor Destinations Moderate Fund
(formerly Investor Destinations Moderate Fund and
Nationwide Investor Destinations Moderate Fund)
Gartmore Investor Destinations Moderately Conservative Fund
(formerly Investor Destinations Moderately Conservative Fund and
Nationwide Investor Destinations Moderately Conservative Fund)
Gartmore Investor Destinations Conservative Fund
(formerly Investor Destinations Conservative Fund and
Nationwide Investor Destinations Conservative Fund)
Gartmore Micro Cap Equity Fund
Gartmore Mid Cap Growth Fund
Gartmore U.S. Growth Leaders Long-Short Fund (formerly Gartmore Long-Short
Equity Plus Fund)
Gartmore China Opportunities Fund
Gartmore Global Natural Resources Fund
Gartmore Optimal Allocations Fund: Growth (formerly Gartmore Optimal Allocations
Fund: Aggressive)
Gartmore Optimal Allocations Fund: Moderate Growth (formerly Gartmore Optimal
Allocations Fund: Moderately Aggressive)
Gartmore Optimal Allocations Fund: Moderate (formerly Gartmore Actively Managed
Moderate Asset Allocation Fund)
Gartmore Optimal Allocations Fund: Specialty (formerly Gartmore Actively Managed
Specialty Asset Allocation Fund)
Gartmore Optimal Allocations Fund: Defensive
Gartmore Small Cap Leaders Fund
Gartmore Hedged Core Equity Fund
Gartmore Small Cap Growth Opportunities Fund
Gartmore Small Cap Value Fund
Gartmore Small Cap Core Fund
Gartmore Market Neutral Fund
# 192337 v. 4
EX-99(h)(2)(b)
SERVICING AGREEMENT
GARTMORE MUTUAL FUNDS
Agreement, made as of this __________ day of ______________ , 200__ between Gartmore Mutual Funds or its surviving entity ("collectively, the Trust") and _____________________, whereby you agree to provide certain administrative support services to your customers who may from time to time be the record or beneficial owners of shares (such shares referred to herein as the "Shares") of the funds listed in Appendix A (each a "Fund") subject to the following terms and conditions:
1. Administrative Support Services
You agree to provide administrative support services, directly or through an affiliate/designee, to your customers who may from time to time own of record or beneficially a Fund's Shares. Services provided may include, but are not limited to, some or all of the following: (i) processing dividend and distribution payments from the Fund on behalf of customers; (ii) providing periodic statements to your customers showing their positions in the Shares or share equivalents; (iii) arranging for bank wires; (iv) responding to routine customer inquiries relating to services performed by you; (v) providing sub-accounting with respect to the Shares beneficially owned by your customers or the information necessary for sub-accounting; (vi) if required by law, forwarding shareholder communications from the Fund (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to your customers; (vii) forwarding to customers proxy statements and proxies containing any proposals regarding this Agreement or the Administrative Services Plan related hereto; (viii) aggregating and processing purchase, exchange, and redemption requests from customers and placing net purchase, exchange, and redemption orders for your customers; (ix) providing customers with a service that invests the assets of their accounts in the Shares pursuant to specific or preauthorized instructions; (x) establishing and maintaining customer accounts and records related to transactions in the Shares (xi) assisting customers in changing dividend or distribution options, account designations and addresses; or (xii) other similar services if requested by the Funds.
In providing administrative support services, you agree to follow any written guidelines or standards relating to the processing of purchase, exchange and redemption orders for your customers as we may provide to you including the provisions outlined in Appendix B. All purchase and redemption orders will be executed at net asset value in accordance with the terms and conditions of a Fund's then current prospectus and Statement of Additional Information.
You and your employees will, upon reasonable request, be available during normal business hours to consult with the Funds or their designees concerning the performance of your responsibilities under this Agreement.
January 2007 1 I # 227206 v.1
2. Office Space
You will provide such office space and equipment, telephone facilities and personnel (which may be any part of the space, equipment and facilities currently used in your business, or any personnel employed by you) as may be reasonably necessary or beneficial in order to provide the aforementioned services to customers.
3. Representations
Neither you nor any of your officers, employees or agents are authorized to make any representations concerning the Funds or their Shares except those contained in the then-current prospectuses or then-current Statements of Additional Information for such shares, copies of which will be supplied by the Fund's distributor, to you, or in such supplemental literature or advertising as may be authorized by the Funds in writing.
4. Independent Contractor
For all purposes of this Agreement you will be deemed to be an independent contractor, and will have no authority to act as limited agent for the Fund in any matter or in any respect except that if you transmit purchase and sale instructions to the Funds or its agent after the close of the New York Stock Exchange, then you will be considered the Fund's agent for purposes of Rule 22c-1 under the Investment Company Act of 1940.
5. Indemnification
By your written acceptance of this Agreement, you agree to and do release, indemnify and hold the Funds harmless from and against any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions of or by you or your officers, employees or agents regarding your responsibilities hereunder or the purchase, redemption, transfer or registration of the Shares by or on behalf of customers.
In turn, the Funds agree to and do release, indemnify and hold you harmless from and against any and all direct or indirect liabilities or losses resulting from directions, actions or inactions of or by the Funds or the Funds' officers, employees or agents regarding the responsibilities pursuant to this Agreement.
6. Compensation
In consideration for the services and facilities provided by you hereunder, the Funds will pay to you, and you will accept as full payment therefore, a fee at the annual rate designated in Appendix A of the average daily net assets of a Fund's Shares owned of record or beneficially by your customers from time to time for which you provide services hereunder, which fee will be computed daily and payable monthly. The fee rate stated above may be prospectively increased or decreased by the Fund and the investment adviser, in their sole discretion, at any time upon notice to you. Further, the Fund may, in its discretion and without notice, suspend or withdraw the sale of such Shares, including the sale of such Shares to you for the account of any customer(s).
January 2007 2 I # 227206 v.1
7. Quarterly Reports
Any person authorized to direct the disposition of monies paid or payable by the Funds pursuant to this Agreement will provide to the Board of Trustees of the Trust and the Trustees will review, at least quarterly, a written report of the amounts so expended and the entities to whom such expenditures were made. In addition, you will furnish the Funds or their designees with such information as the Funds or their designees may reasonably request (including, without limitation, periodic certifications confirming the provision to customers of some or all of the services described herein), and will otherwise cooperate with the Funds and their designees (including, without limitation, any auditors designated by the Funds), in connection with the preparation of reports to the Trust's Board of Trustees concerning this Agreement and the monies paid or payable by the Funds pursuant hereto, as well as any other reports or filings that may be required by law.
8. Non-Exclusivity
Both parties may enter into other similar Servicing Agreements with any other
person or persons without the
other's consent.
9. Representations
By your written acceptance of this Agreement, you represent, warrant and agree that: (i) in no event will any of the services provided by you hereunder be primarily intended to result in the sale of any shares issued by the Fund; (ii) the compensation payable to you hereunder, together with any other compensation you receive from customers for services contemplated by this Agreement, will to the extent required be disclosed to your customers, and will not be excessive or unreasonable under the laws and instruments governing your relationships with your customers; and (iii) if you are subject to laws governing, among other things, the conduct of activities by federally chartered and supervised banks and other affiliated banking organizations, you will perform only those activities which are consistent with your statutory and regulatory obligations.
10. Termination
This Agreement will become effective on the date a fully executed copy of this Agreement is received by the Funds or their designee. This Agreement may be terminated at any time, without the payment of any penalty with respect to the Funds by the vote of a majority of the members of the Board of Trustees and who have no direct or indirect financial interest in the operation of the Administrative Servicing Plan or in any related agreements to the Administrative Servicing Plan ("Disinterested Trustees") or by a majority of the outstanding voting securities of the Fund, on at least sixty (60) days written notice to the parties to this Agreement, or upon material breach of this Agreement or by either party on at least ninety (90) days written notice to the other party.
In the event this Agreement is terminated under the Terms and Conditions described in such Agreement, the indemnification provision contained in the Agreement shall continue until the possibilities for damages or loss have expired.
January 2007 3 I # 227206 v.1
11. Notices
All notices and other communications to either you or the Funds will be duly given if mailed, telegraphed, telexed or transmitted by similar telecommunications device to the address contained in the "Acceptance of Agreement" (Section 19) portion of this Agreement.
January 2007 4 I # 227206 v.1
12. Choice of Law
This Agreement will be construed in accordance with the laws of the State of Delaware and is assignable upon written consent by all the parties hereto. Amendments will be made only upon written consent by both parties and subject to the approval of the Board of Trustees of the Trust when applicable.
13. Board Approval
This Agreement, or form thereof, has been approved by vote of a majority of (i) the Board of Trustees and (ii) the Disinterested Trustees, cast in person at a meeting called for the purpose of voting on such approval.
14. Trust Disclosure
The Trust is a statutory trust organized under the laws of Delaware and under a Declaration of Trust, to which reference is hereby made and a copy of which is on file at the office of the Secretary of State of Delaware as required by law, and to any and all amendments thereto so filed or hereafter filed. The obligations of a Fund or the Trust entered into in the name or on behalf thereof by any of the Trustees, officers, employees or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, officers, employees, agents or shareholders as they relate to the Fund personally, but bind only the assets of the Trust, and all persons dealing with a Fund must look solely to the assets of that Fund for the enforcement of any claims against the Trust.
15. Complete Agreement
This Agreement supersedes and cancels any prior Service Agreement with respect to the sale of shares of a Fund listed in Exhibit A, and may be amended at any time and from time to time by written agreement of the parties hereto subject to the approval of the Board of Trustees of the Trust, when applicable. Notwithstanding the foregoing, the Trust may amend or modify the Exhibits incorporated herein, as provided throughout this Agreement, by providing new exhibits to you. However, such amendment shall only become effective and part of this Agreement and be considered binding upon the first transaction by you under the new exhibits.
16. Privacy Program
Each party of this Agreement agrees to protect Customer Information (defined below) and to comply as may be necessary with requirements of the Gramm-Leach-Bliley Act, the relevant state and federal regulations pursuant thereto, including Regulation S-P, and state privacy laws (all the foregoing referred to as "Privacy Law").
Customer Information means any information contained on an application of a customer ("Customer") of the Funds or other form and all nonpublic personal information about a Customer that a party receives from the other party.
January 2007 5 I # 227206 v.1
Customer Information includes, by way of example and not limitation, name, address, telephone number, social security number, date of birth and personal financial information.
The parties shall establish and maintain safeguards against the unauthorized access, destruction, loss or alteration of Customer Information in their control, which are no less rigorous than those maintained by a party for its own information of a similar nature. In the event of any improper disclosure of any Customer Information, the party responsible for the disclosure will immediately notify the other party.
The provisions of this Privacy Program shall survive the termination of the Agreement.
17. Anti-Money Laundering Program
The Funds will rely upon you to establish a written Anti-Money Laundering Program (the "Program") to include policies, procedures, and controls that comply with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA Patriot Act) of 2001, ("the ACT") and the Bank Secrecy Act of 1970 ("BSA"). Each party to this Agreement acknowledges, represents, and warrants that each party has adopted and implemented an Anti-Money Laundering Program that complies and will continue to comply with all aspects and requirements of the ACT, the BSA, and all other applicable anti-money laundering laws and regulations.
Upon request, you shall promptly certify to having such Program that complies with and continues to comply with all aspects and requirements of the ACT, the BSA, and all other applicable federal, state and local anti-money laundering laws and regulations.
Your Program shall include, and the Funds shall rely upon, your policies, procedures and controls to, among other things, (i) verify the identity (due diligence) of your customers, (ii) maintain records of the information used to identify your customers, (iii) determine if your customer appears on lists of known or suspected terrorists or associated with known or suspected terrorist organizations (said customer hereinafter referred to as a "Prohibited Customer"), and (iv) to ensure that Prohibited Customers and foreign shell banks do not maintain investments in any Fund.
Your Program shall also comply with the Customer Identification Program ("CIP") for customers who open accounts on or after October 1, 2003, and as such, shall among other matters provide for the release of customer information to law enforcement agencies, and the filing of Suspicious Activity Reports ("SARs"), as and if applicable, and in accordance with the ACT. In addition, your Program also shall include procedures for fulfilling the currency reporting requirements of the ACT and the BSA, as and if applicable.
The provisions of this Anti-Money Laundering section shall survive the termination of the Agreement.
January 2007 6 I # 227206 v.1
18. Shareholder Information
18.1 AGREEMENT TO PROVIDE INFORMATION. You agree to provide the Funds, upon written request, the taxpayer identification number ("TIN"), if known, of any or all Shareholder(s) of the account and the amount, date, name or other identifier of any registered representative(s) associated with the Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Shares held through an account maintained by you during the period covered by the request.
18.1.1 PERIOD COVERED BY REQUEST. Requests must set forth a specific period, not to exceed 12 months from the date of the request, for which transaction information is sought. A Fund may request transaction information older than 12 months from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.
18.1.2 FORM AND TIMING OF RESPONSE. You agree to transmit the requested information that is on your books and records to the Fund or its designee promptly, but in any event not later than five (5) business days, after receipt of a request. If the requested information is not on your books and records, you agree to: (i) provide or arrange to provide the requested information from Shareholders who hold an account with an indirect intermediary; or (ii) if directed by the Fund, block further purchases of Fund Shares from such indirect intermediary. In such instance, you agree to inform the Fund whether you plan to perform (i) or (ii). Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to a Fund should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, an "indirect intermediary" has the same meaning as in SEC Rule 22c-2 under the Investment Company Act of 1940.
18.1.3 LIMITATIONS ON USE OF INFORMATION. The Fund agrees not to use the information received for marketing or any other similar purpose without your prior written consent.
18.2 AGREEMENT TO RESTRICT TRADING. You agree to execute written instructions from a Fund to restrict or prohibit further purchases or exchanges of Shares by a Shareholder that has been identified by such Fund as having engaged in transactions of the Fund's Shares (directly or indirectly through your account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding Shares issued by the Fund.
18.2.1 FORM OF INSTRUCTIONS. Instructions must include the TIN, if known, and the specific restriction(s) to be executed. If the TIN is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates.
January 2007 7 I # 227206 v.1
18.2.2 TIMING OF RESPONSE. You agree to execute instructions as soon as reasonably practicable, but not later than five business days after your receipt of the instructions.
18.2.3 CONFIRMATION BY YOU. You must provide written confirmation to the Fund that instructions have been executed. You agree to provide confirmation as soon as reasonably practicable, but not later than ten business days after the instructions have been executed.
18.3 DEFINITIONS. For purposes of this paragraph 18:
18.3.1 The term "Fund" includes a Fund's distributor and a
Fund's transfer agent. The term not does include any
"excepted funds" as defined in SEC Rule 22c-2(b)
under the Investment Company Act of 1940.
18.3.2 The term "Shares" means the interest of Shareholders
corresponding to the redeemable securities of record
issued by a Fund under the Investment Company Act of
1940 that are held by you.
18.3.3 The term "Shareholder" means the beneficial owner of
Shares, whether the Shares are held directly or by
you in nominee name.
18.3.4 The term "written" includes electronic writings and
facsimile transmissions.
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19. Acceptance of Agreement
If you agree to be legally bound by the provisions of this Agreement, please sign a copy of this Agreement where indicated below and promptly return it to the Fund's designee, Gartmore Distribution Services, Inc., to the address below:
Gartmore Distribution Services, Inc.
Attention: Dealer Services Department
1200 River Road, Suite 1000
Conshohocken, PA 19428.
This Agreement will become effective on the date a fully executed copy of this Agreement is received by our designee.
Accepted by:
January 2007 8 I # 227206 v.1
Date: _________________________
Accepted and Agreed to:
By: _________________________ Name: _________________________ Title: _________________________ Company: _________________________ Date: _________________________ January 2007 9 I # 227206 v.1 |
EX-99(h)(2)(b)
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APPENDIX A
TO SERVICING AGREEMENT
GARTMORE MUTUAL FUNDS
o FUNDS OF GARTMORE MUTUAL FUNDS
o ADMINISTRATIVE SERVICING FEES
The servicing fee shall be ______%
Acknowledgement: Servicing Agent or Dealer: Gartmore Mutual Funds c/o Gartmore Distribution Services, Inc. 1200 River Road, Suite 1000 Conshohocken, PA 19428 x _______________________________________ x____________________________ By: William Baltrus, Assistant Secretary By: January 2007 A-1 I # 227206 v.1 |
EX-99(h)(2)(b)
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APPENDIX B
FUND/SERV PROCESSING PROCEDURES
AND
MANUAL PROCESSING PROCEDURES
The purchase, redemption and settlement of Shares of a Fund will normally follow the Fund/SERV-Defined Contribution Clearance and Settlement Service ("DCCS") Processing Procedures below and the rules and procedures of the SCC Division of the National Securities Clearing Corporation ("NSCC") shall govern the purchase, redemption and settlement of Shares of the Funds through NSCC by the Dealer. In the event of equipment failure or technical malfunctions or the parties' inability to otherwise perform transactions pursuant to the FUND/SERV Processing Procedures, or the parties' mutual consent to use manual processing, the Manual Processing Procedures below will apply.
It is understood and agreed that, in the context of Section 22 of the 1940 Act and the rules and public interpretations thereunder by the staff of the Securities and Exchange Commission (SEC Staff), receipt by the Dealer of any Instructions from the Client-shareholder prior to the Close of Trade on any Business Day shall be deemed to be receipt by the Funds of such Instructions solely for pricing purposes and shall cause purchases and sales to be deemed to occur at the Share Price for such Business Day, except as provided in 4(c) of the Manual Processing Procedures. Each Instruction shall be deemed to be accompanied by a representation by the Dealer that it has received proper authorization from each Client-shareholder whose purchase, redemption, account transfer or exchange transaction is effected as a result of such Instruction.
FUND/SERV-DCCS PROCESSING PROCEDURES
1. On each business day that the New York Stock Exchange (the "Exchange") is open for business on which the Funds determine their net asset values ("Business Day"), the Distributor shall accept, and effect changes in its records upon receipt of purchase, redemption, exchange, account transfer and registration instructions from the Dealer electronically through Fund/SERV ("Instructions") without supporting documentation from the Client-shareholder. On each Business Day, the Distributor shall accept for processing any Instructions from the Dealer and shall process such Instructions in a timely manner.
2. Distributor shall perform any and all duties, functions, procedures and responsibilities assigned to it under this Agreement and as otherwise established by the NSCC. Distributor shall conduct each of the foregoing activities in a competent manner and in compliance with (a) all applicable laws, rules and regulations, including NSCC Fund/SERV-DCCS rules and procedures relating to Fund/SERV; (b) the then-current Prospectus of a Fund; and (c) any provision relating to Fund/SERV in any other agreement of the Distributor that would affect its duties and obligations pursuant to this Agreement.
3. Confirmed trades and any other information provided by the Distributor to the Dealer through Fund/SERV and pursuant to this Agreement shall be accurate, complete, and in the format prescribed by the NSCC.
January 2007 B-1 I # 227206 v.1
4. Trade, registration, and broker/dealer information provided by the Dealer to the Distributor through Fund/SERV and pursuant to this Agreement shall be accurate, complete and, in the format prescribed by the NSCC. All Instructions by the Dealer regarding each Fund/SERV Account shall be true and correct and will have been duly authorized by the registered holder.
5. For each Fund/SERV transaction, including transactions establishing a
Client-shareholder account with the Distributor, the Dealer shall
provide the Funds and the Distributor with all information necessary or
appropriate to establish and maintain each Fund/SERV transaction (and
any subsequent changes to such information), which the Dealer hereby
certifies is and shall remain true and correct. The Dealer shall
maintain documents required by the Funds to effect Fund/SERV
transactions. The Dealer certifies that all Instructions delivered to
Distributor on any Business Day shall have been received by the Dealer
from the Client-shareholder by the close of trading (generally 4:00
p.m. Eastern Time ("ET")) on the Exchange (the "Close of Trading") on
such Business Day and that any Instructions received by it after the
Close of Trading on any given Business Day will be transmitted to
Distributor on the next Business Day.
MANUAL PROCESSING PROCEDURES
1. On each Business Day, the Dealer may receive Instructions from the Client-shareholder for the purchase or redemption of shares of the Funds based solely upon receipt of such Instructions prior to the Close of Trading on that Business Day. Instructions in good order received by the Dealer prior to the close of trading on any given Business Day (generally, 4:00 p.m. ET (the "Trade Date") and transmitted to the Distributor by no later than 9:30 a.m. ET the Business Day following the Trade Date ("Trade Date plus One" or "TD+1"), will be executed at the NAV ("Share Price") of each applicable Fund, determined as of the Close of Trading on the Trade Date.
2. By no later than 6:00 p.m. ET on each Trade Date ("Price Communication Time"), the Distributor will use its best efforts to communicate to the Dealer via electronic transmission acceptable to both parties, the Share Price of each applicable Fund, as well as dividend and capital gain information and, in the case of funds that credit a daily dividend, the daily accrual for interest rate factor (mil rate), determined at the Close of Trading on that Trade Date.
3. As noted in Paragraph 1 above, by 9:30 a.m. ET on TD+1 ("Instruction Cutoff Time") and after the Dealer has processed all approved transactions, the Dealer will transmit to the Distributor via facsimile, telefax or electronic transmission or system-to-system, or by a method acceptable to the Dealer and the Distributor, a report (the "Instruction Report") detailing the Instructions that were received by the Dealer prior to the Funds' daily determination of Share Price for each Fund (i.e., the Close of Trading) on Trade Date.
(a) It is understood by the parties that all Instructions from the Client-shareholder shall be received and processed by the Dealer in accordance with its standard transaction processing procedures. The Dealer or its designees shall maintain records
January 2007 B-2 I # 227206 v.1
sufficient to identify the date and time of receipt of all Client-shareholder transactions involving the Funds and shall make or cause to be made such records available upon reasonable request for examination by the Funds or its designated representative or, at the request of the Funds, by appropriate governmental authorities. Under no circumstances shall the Dealer change, alter or modify any Instructions received by it in good order.
(b) Following the completion of the transmission of any Instructions by the Dealer to the Distributor by the Instruction Cutoff Time, the Dealer will verify that the Instruction was received by the Distributor and trades are pending by utilizing a remote terminal or such other method acceptable to the Distributor.
(c) In the event that an Instruction transmitted by the Dealer on any Business Day is not received by the Distributor by the Instruction Cutoff Time, due to mechanical difficulties or for any other reason beyond the Dealer's reasonable control, such Instruction shall nonetheless be treated by the Distributor as if it had been received by the Instruction Cutoff Time, provided that the Dealer retransmits such Instruction by facsimile transmission to the Distributor and such Instruction is received by the Distributor's financial control representative no later than 9:30 a.m. ET on TD+1. In addition, the Dealer will place a phone call to a financial control representative of the Distributor prior to 9:00 a.m. ET on TD+1 to advise the Distributor that a facsimile transmission concerning the Instruction is being sent.
(d) With respect to all Instructions, the Distributor's financial control representative will manually adjust a Fund's records for the Trade Date to reflect any Instructions sent by the Dealer.
(e) By no later than 4:00 p.m. on TD+1, and based on the information transmitted to the Distributor pursuant to Paragraph 3(c) above, the Dealer will use its best efforts to verify that all Instructions provided to the Distributor on TD+1 were accurately received and that the trades for each Account were accurately completed and the Dealer will use its best efforts to notify Distributor of any discrepancies.
4. As set forth below, upon the timely receipt from the Dealer of the Instructions, the Fund will execute the purchase or redemption transactions (as the case may be) at the Share Price for each Fund computed as of the Close of Trading on the Trade Date.
(a) Except as otherwise provided herein, all purchase and redemption transactions will settle on TD+1. Settlements will be through net Federal Wire transfers to an account designated by a Fund. In the case of Instructions which constitute a net purchase order, settlement shall occur by the Dealer instructing the trustee or custodian for the Funds to initiate a wire transfer by 1:00 p.m. ET on TD+1 to the custodian for the Fund for receipt by the Funds' custodian by no later than the Close of Business at the New York Federal Reserve Bank on TD+1, causing the remittance of the requisite funds to the
January 2007 B-3 I # 227206 v.1
Distributor to cover such net purchase order. In the case of Instructions which constitute a net redemption order, settlement shall occur by the Distributor causing the remittance of the requisite funds to cover such net redemption order by Federal Funds Wire by 1:00 p.m. ET on TD+1, provided that the Fund reserves the right to (i) delay settlement of redemptions for up to seven (7) Business Days after receiving a net redemption order in accordance with Section 22 of the 1940 Act and Rule 22c-1 thereunder, or (iii) suspend redemptions pursuant to the 1940 Act or as otherwise required by law. Settlements shall be in U.S. dollars and a Fund may pay redemption proceeds in whole or in part by a distribution in-kind of readily marketable securities that it holds in lieu of cash in conformity with applicable law or regulations.
(b) The Dealer or such other party as may be designated, as record owner of each account ("Record Owner") will be provided with all written confirmations required under federal and state securities laws.
(c) On any Business Day when the Federal Reserve Wire Transfer System is closed, all communication and processing rules will be suspended for the settlement of Instructions. Instructions will be settled on the next Business Day on which the Federal Reserve Wire Transfer System is open. The original TD+1 Settlement Date will not apply. Rather, for purposes of this Paragraph 4(c) only, the Settlement Date will be the date on which the Instruction settles.
(d) The Dealer shall, upon receipt of any confirmation or statement concerning the accounts, promptly verify by use of the terminal or by such other method acceptable to the Distributor and the Dealer the accuracy of the information contained therein against the information contained in the Dealer's internal record-keeping system and shall promptly, but in no event not more than SEVEN days, advise the Distributor in writing of any discrepancies between such information. The Distributor and the Dealer shall cooperate to resolve any such discrepancies as soon as reasonably practicable.
INDEMNIFICATION
In the event of any error or delay with respect to both the Fund/SERV Processing
Procedures and the Manual Processing Procedures outlined in Exhibit B herein:
(i) which is caused by the Funds or the Distributor, the Distributor shall make
any adjustments on the Funds' accounting system necessary to correct such error
or delay and the responsible party or parties shall reimburse the
Client-shareholder and the Dealer, as appropriate, for any losses or reasonable
costs incurred directly as a result of the error or delay but specifically
excluding any and all consequential punitive or other indirect damages or (ii)
which is caused by the Dealer or by any Client-shareholder, the Distributor
shall make any adjustment on the Funds' accounting system necessary to correct
such error or delay and the affected party or parties shall be reimbursed by the
Dealer for any losses or reasonable costs incurred directly as a result of the
error or delay, but specifically excluding any and all consequential punitive or
other indirect damages. In the event of any such adjustments on the Funds'
accounting system, Dealer shall make the corresponding adjustments on its
internal record-keeping system. In the event that errors or delays with respect
to the Procedures are contributed to by more than one party hereto, each party
shall be responsible for that portion of the loss or reasonable cost which
results from its error or delay. All parties agree to provide the other parties
prompt notice of any errors or delays of the type referred to herein and to use
reasonable efforts to take such action as may be appropriate to avoid or
mitigate any such costs or losses.
January 2007 B-4 I # 227206 v.1
EX-99(h)(2)(a)
Administrative Services Plan
Gartmore Mutual Funds
Amended, January 11, 2007
to be effective February 28, 2007
Section 1. This Administrative Services Plan (the "Plan") constitutes the administrative services plan for the classes of the funds as listed on Exhibit A (collectively, the "Funds"), each a series of Gartmore Mutual Funds (the "Trust"), and is adopted upon review and approval by the Board of Trustees of the Trust.
Section 2. Upon the recommendation of the administrator of the Funds, any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Fund, written agreements in substantially any other form duly approved by the Board of Trustees of the Trust ("Servicing Agreements") with financial institutions which are shareholders of record or which have a servicing relationship ("Service Organizations") with the beneficial owners of a class of a Fund's shares of beneficial interest ("Shares"). Such Servicing Agreements shall require the Service Organizations to provide administrative support services as set forth therein and as described in a Fund's applicable Prospectus to their customers who own of record or beneficially Shares. In consideration for providing such services, a Service Organization will receive a fee, computed daily and paid monthly in the manner set forth in the Servicing Agreements, and up to the annual rate listed on Exhibit A for each class of shares owned of record or beneficially by such customers. Any bank, trust company, thrift institution, broker-dealer, insurance company or other financial institution is eligible to become a Service Organization and to receive fees under this Plan. All expenses incurred by a Fund with respect to its Shares in connection with the Servicing Agreements and the implementation of this Plan shall be borne entirely by the holders of Shares of that Fund.
Section 3. So long as this Plan is in effect, the administrator shall provide to a Fund's Board of Trustees, and the Trustees shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made.
Section 4. The Plan shall not take effect with respect to the Shares of a Fund until it has been approved, together with the form of the Servicing Agreements, by a vote of a majority of the Trustees who are not "interested persons" of that Fund (as defined in the Investment Company Act of 1940) and who have no direct or indirect financial interest in the operation of this Plan or in any agreements related to this Plan (the "Disinterested Trustees"), cast in person at a meeting called for the purpose of voting on the Plan or such Servicing Agreement, provided, however, that the Plan is not implemented prior to the effective date of the post-effective amendment to a Fund's registration statement describing the Plan and its implementation with respect to that Fund.
Section 5. Unless sooner terminated, this Plan shall continue until February 27, 2008, and thereafter, shall continue automatically for successive annual periods provided such continuance is approved at least annually by a majority of the Board of Trustees, including a majority of the Disinterested Trustees.
Section 6. This Plan may be amended at any time with respect to a Fund by the Board of Trustees, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time with respect to the Fund by vote of a majority of the Disinterested Trustees.
Section 8. While this Plan is in effect, the selection and nomination of those Disinterested Trustees shall be committed to the discretion of the Disinterested Trustees of the Trust.
Section 9. This Plan has been adopted as of February 28, 2005.
Section 10. The Trust is a statutory trust organized under the Delaware Statutory Trust Act (12 Del. C. ss. 3801 et seq) and under an Agreement and Declaration of Trust and any and all amendments thereto. Pursuant to Section 3804 of the Delaware Statutory Trust Act, the debts, liabilities, obligations, costs, charges, reserves and expenses incurred, contracted for or otherwise existing with respect to a particular series, whether such series is now authorized and existing pursuant to the governing instrument of the Trust or is hereafter authorized and existing pursuant to said governing instrument, shall be enforceable against the assets associated with such series only, and not against the assets of the Trust generally or any other series thereof, and, except as otherwise provided in the governing instrument of the Trust, none of the debts, liabilities, obligations, costs, charges, reserves and expenses incurred, contracted for or otherwise existing with respect to the Trust generally or any other series thereof shall be enforceable against the assets of such series.
GARTMORE MUTUAL FUNDS
ADMINISTRATIVE SERVICES PLAN
Exhibit A
Amended, January 11, 2007
to be effective February 28, 2007
GARTMORE MUTUAL FUNDS
ADMINISTRATIVE SERVICES PLAN
Exhibit A
Amended, January 11, 2007
to be effective February 28, 2007
Gartmore Mid Cap Growth Leaders Fund A, D, R, Institutional Service (formerly Gartmore Millennium Growth and Nationwide Mid Cap Growth Fund) Gartmore Growth Fund (formerly Nationwide Growth Fund) A, D, R, Institutional Service Gartmore Nationwide Fund (formerly Gartmore Total Return Fund) A, D, R, Institutional Service Gartmore Bond Fund A, D, R (formerly Nationwide Bond Fund) Gartmore Tax-Free Income Fund A, D (formerly Nationwide Tax-Free Income Fund) Gartmore Government Bond Fund A, D, R formerly Nationwide Intermediate U.S. Government Bond Fund and Nationwide Government Bond Fund) Gartmore Money Market Fund Prime, Service (formerly Nationwide Money Market Fund) Gartmore S&P 500 Index Fund (formerly Nationwide S&P A, R, Service, Institutional 500 Index Fund) Service Gartmore Small Cap Fund (formerly Nationwide Small Cap Fund A, R, Institutional Service and Prestige Small Cap Fund) Gartmore Large Cap Value Fund A, R, Institutional Service (formerly Prestige Large Cap Value Fund and Nationwide Large Cap Value Fund) Gartmore Short Duration Bond Fund A, Service, IRA (formerly Morley Capital Accumulation Fund, Nationwide Morley Capital Accumulation Fund and Gartmore Morley Capital Accumulation Fund) Gartmore U.S. Growth Leaders Fund A, R, Institutional Service (formerly Nationwide Focus Fund and Gartmore Growth 20 Fund) Gartmore Value Opportunities Fund A, R, Institutional Service (formerly Nationwide Value Opportunities Fund) Gartmore Enhanced Income Fund A, R, Institutional Service (formerly Gartmore Morley Enhanced Income Fund and Nationwide Morley Enhanced Income Fund) Gartmore Small Cap Index Fund (formerly Nationwide Small Cap Index Fund) A, R Gartmore Mid Cap Market Index Fund (formerly Nationwide Mid Cap A, R Market Index Fund) Gartmore International Index Fund (formerly Nationwide International A, R Index Fund) Gartmore Bond Index Fund (formerly Nationwide Bond Index Fund) A, R Gartmore Investor Destinations Aggressive Fund A, R, Service (formerly Investor Destinations Aggressive Fund and Nationwide Investor Destinations Aggressive Fund) |
Gartmore Investor Destinations Moderately Aggressive Fund A, R, Service
(formerly Investor Destinations Moderately Aggressive Fund
and Nationwide Investor Destinations Moderately
Aggressive Fund)
Gartmore Investor Destinations Moderate Fund A, R, Service
(formerly Investor Destinations Moderate Fund and
Nationwide Investor Destinations Moderate Fund)
Gartmore Investor Destinations Moderately Conservative Fund A, R, Service
(formerly Investor Destinations Moderately Conservative Fund
and Nationwide Investor Destinations Moderately
Conservative Fund)
Gartmore Investor Destinations Conservative Fund A, R, Service
(formerly Investor Destinations Conservative Fund
and Nationwide Investor Destinations Conservative
Fund)
Gartmore Global Technology and Communications Fund A, R, Institutional Service
(formerly Nationwide Global Technology
and Communications Fund)
Gartmore Global Health Sciences Fund A, R, Institutional Service
(formerly Nationwide Global Life Sciences Fund)
Gartmore Emerging Markets Fund A, R, Institutional Service
Gartmore International Growth Fund A, R, Institutional Service
Gartmore Worldwide Leaders Fund A, R, Institutional Service
(formerly Gartmore Global Leaders Fund)
Gartmore Global Financial Services Fund A, R, Institutional Service
Gartmore Global Utilities Fund A, R, Institutional Service
Gartmore Nationwide Leaders Fund A, R, Institutional Service
Gartmore Micro Cap Equity Fund A, R, Institutional Service
Gartmore Mid Cap Growth Fund A, R, Institutional Service
Gartmore U.S. Growth Leaders Long-Short Fund (formerly Gartmore A, R, Institutional Service
Long-Short Equity Plus Fund)
Gartmore China Opportunities Fund A, R, Institutional Service
Gartmore Small Cap Growth Opportunities Fund A, R, Institutional Service
Gartmore Small Cap Value Fund A, R, Institutional Service
Gartmore Small Cap Core Fund A, R, Institutional Service
Gartmore Market Neutral Fund A, R, Institutional Service
|
Gartmore Global Natural Resources Fund A, R, Institutional Service
Gartmore Optimal Allocations Fund: A, R, Institutional Service
Growth (formerly Gartmore Optimal Allocations Fund: Aggressive)
Gartmore Optimal Allocations Fund: A, R, Institutional Service
Moderate Growth (formerly Gartmore Optimal Allocations Fund: Moderately
Aggressive)
Gartmore Optimal A, R, Institutional Service
Allocations Fund: Moderate
Gartmore Optimal A, R, Institutional Service
Allocations Fund: Specialty
Gartmore Optimal A, R, Institutional Service
Allocations Fund: Defensive
NorthPointe Small Cap Growth Fund A, R, Institutional Service
NorthPointe Small Cap Value Fund A, R, Institutional Service
Gartmore Small Cap Leaders Fund A, R, Institutional Service
Gartmore Hedged Core Equity Fund A, R, Institutional Service
--------------
The Funds shall pay amounts not exceeding on an annual basis a maximum amount
of:
(a) 25 basis points (0.25%) of the average daily net assets of the Class A Shares of the Funds;
(b) 25 basis points (0.25%) of the average daily net assets of the Class D Shares of the Funds;
(c) 25 basis points (0.25%) of the average daily net assets of the Class R Shares of the Funds;
(d) 25 basis points (0.25%) of the average daily net assets of the Service Class Shares of the Funds;
(e) 25 basis points (0.25%) of the average daily net assets of the Institutional Service Class Shares of the
Funds;
(e) 25 basis points (0.25%) of the average daily net assets of the Prime Shares of the Gartmore Money Market
Fund; and
(f) 25 basis points (0.25%) of the average daily net assets of the IRA
Class Shares of the Gartmore Short Duration Bond Fund.
|
EX-99(h)(3)
EXPENSE LIMITATION AGREEMENT
GARTMORE MUTUAL FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of February 28, 2007, by and between GARTMORE MUTUAL FUND CAPITAL TRUST (the "Investment Adviser") and GARTMORE MUTUAL FUNDS, a Delaware statutory trust (the "Trust"), on behalf of the funds listed on Exhibit A (each, a "Fund").
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open end management company of the series type, and the Fund is a separate series of the Trust; and
WHEREAS, the Trust and the Investment Adviser have entered into an Investment Advisory Agreement (the "Advisory Agreement"), pursuant to which the Investment Adviser renders investment advisory services to each Fund for compensation based on the value of the average daily net assets of that Fund; and
WHEREAS, the Trust and the Investment Adviser have determined that it is appropriate and in the best interests of each Fund and its shareholders to maintain the expenses of the Fund at a level below the level to which that Fund would otherwise be subject.
NOW, THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the aggregate expenses incurred by a Fund or a class of a Fund in any fiscal year, including but not limited to investment advisory fees of the Investment Adviser (but excluding interest, taxes, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, Rule 12b-1 fees, fees paid pursuant to an Administrative Services Plan, short sale dividend expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles, expenses incurred by a Fund in connection with any merger or reorganization, and other non-routine expenses not incurred in the ordinary course of the Fund's business) ("Fund Operating Expenses"), exceed the Operating Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be the liability of the Investment Adviser.
1.2. Operating Expense Limit. The Operating Expense Limit in any year shall be a percentage of the average daily net assets of each class of the Fund as described in Exhibit A, or such other rate as may be agreed to in writing by the parties. The parties hereby agree that Operating Expense Limit described in Exhibit A will not be increased before the date listed on Exhibit A.
1.3. Method of Computation--Non-Daily Dividend Funds. To determine the
Investment Adviser's liability with respect to the Excess Amount for Funds that
do not accrue daily dividends, each month the Fund Operating Expenses shall be
annualized as of the last day of the month for each class of a Fund. If the
annualized Fund Operating Expenses for any month exceed the Operating Expense
Limit of a Fund class, the Investment Adviser shall (i) waive or reduce its
advisory fee by an amount sufficient to reduce the annualized Fund Operating
Expenses to an amount which does not exceed the Operating Expense Limit, and/or
(ii) remit to a Fund an amount that, together with the waived or reduced
advisory fee, is sufficient to satisfy such Excess Amount.
1.4 Method of Computation - Daily Dividend Funds. To determine the Investment Adviser's liability with respect to the Excess Amount for Funds that accrue daily dividends (a "Daily Dividend Fund"), each day the Fund Operating Expenses shall be annualized as of that day for each class of a Daily Dividend Fund. If the annualized Fund Operating Expenses for any day exceed the Operating Expense Limit of a Daily Dividend Fund class, the Investment Adviser shall (i) on a daily basis waive or reduce its advisory fee for such month by an amount sufficient to reduce the annualized Fund Operating Expenses to an amount which does not exceed the Operating Expense Limit and/or (ii) on a monthly basis remit to a Fund an amount that, together with the waived or reduced advisory fee, is sufficient to satisfy such Excess Amount.
1.5 Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the amount of the advisory fees waived or reduced and other payments remitted by the Investment Adviser to a Fund with respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If in any fiscal year during which total Fund
assets are greater than $100 million and in which the Investment Advisory
Agreement is still in effect, the estimated aggregate Fund Operating Expenses
for the fiscal year are less than the Operating Expense Limit for that year,
subject to quarterly approval by the Trust's Board of Trustees as provided in
Section 2.2 below, the Investment Adviser shall be entitled to reimbursement by
a Fund, in whole or in part as provided below, of the advisory fees waived or
reduced and other payments remitted by the Investment Adviser to the Fund
pursuant to Section 1 hereof. The total amount of reimbursement to which the
Investment Adviser may be entitled (the "Reimbursement Amount") shall equal, at
any time, the sum of all advisory fees previously waived or reduced by the
Investment Adviser and all other payments remitted by the Investment Adviser to
a Fund or a class of a Fund (as appropriate), pursuant to Section 1 hereof, less
any reimbursement previously paid by such Fund to the Investment Adviser,
pursuant to Sections 2.2 or 2.3 hereof, with respect to such waivers,
reductions, and payments; provided, however, that no Reimbursement Amount shall
be paid at a date more than three (3) years after the fiscal year when the
Investment Adviser waived investment advisory fees or reimbursed other expenses
to a Fund or a class of a Fund for the corresponding Excess Amount pursuant to
Section 1. The Reimbursement Amount shall not include any additional charges or
fees whatsoever, including, e.g., interest accruable on the Reimbursement
Amount.
2.2. Board Approval. No reimbursement shall be paid to the Investment Adviser pursuant to this provision in any fiscal year, unless the Trust's Board of Trustees has determined that the payment of such reimbursement is appropriate in light of the terms of this Agreement. The Trust's Board of Trustees shall determine quarterly in advance whether any portion of the Reimbursement Amount may be paid to the Investment Adviser in such quarter.
2.3. Method of Computation. To determine a Fund's payments, if any, to reimburse the Investment Adviser for all or any portion of the Reimbursement Amount, each month the Fund Operating Expenses for each Fund class shall be annualized as of the last day of the month. If the annualized Fund Operating Expenses for any month are less than the Operating Expense Limit for that class for that year, a Fund, only with the prior approval of the Board, shall pay to the Investment Adviser an amount sufficient to increase the annualized Fund Operating Expenses to an amount no greater than the Operating Expense Limit for that year, provided that such amount paid to the Investment Adviser will not exceed the total Reimbursement Amount. If the annualized Fund Operating Expenses for a Fund are greater than the Operating Expense Limit for one or more months in a quarter and less than the remaining month(s), the calculation described in this section will be made on a monthly basis and the net amount of the monthly calculations will be presented to the Board for approval.
2.4. Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the actual Fund Operating Expenses for the prior fiscal year (including any reimbursement payments hereunder with respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall continue in effect for the period listed on Exhibit A for any Fund covered by the Agreement and then unless this Agreement is terminated earlier as provided below, from year to year thereafter provided such continuance is specifically approved by a majority of the Trustees of the Trust who (i) are not "interested persons" of the Trust or any other party to this Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect financial interest in the operation of this Agreement ("Non-Interested Trustees"), provided however, that the reimbursements described in Section 2 will not continue to accrue for more than three years after the fiscal year when the Investment Adviser waived investment advisory fees or reimbursed other expenses to a Fund for the corresponding Excess Amount pursuant to Section 1. In order to terminate the Agreement, the Investment Adviser must give at least 30 days' prior written notice to the Trust prior to the end of the period listed on Exhibit A or the end of the annual renewal. Regardless of any other termination provisions, the provisions contained in Section 2 of this Agreement relating to the reimbursement of the Investment Adviser for fee waivers and expense reimbursements previously made by the Investment Adviser on behalf of the Fund shall survive the termination of the Agreement.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require the Trust or a Fund to take any action contrary to the Trust's Agreement and Declaration of Trust or By-Laws, or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Trust's Board of Trustees of its responsibility for and control of the conduct of the affairs of the Trust or the Fund.
4.3. Definitions. Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment advisory fee, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Advisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above written.
GARTMORE MUTUAL FUNDS
Title:
GARTMORE MUTUAL FUND CAPITAL TRUST
Title:
EXHIBIT A
to the Amended and Restated Expense Limitation Agreement between
GARTMORE MUTUAL FUNDS and
GARTMORE MUTUAL FUND CAPITAL TRUST
Amended, January 11, 2007*
Name of Fund/Class Expense Limitation for Fund/Class Gartmore Mid Cap Growth Fund Class A 1.15% Class B 1.15% Class C 1.15% Class R 1.15% Institutional Service Class 1.15% Institutional Class 1.15% Gartmore Mid Cap Growth Leaders Fund (formerly, Gartmore Millennium Growth Fund) Class A 1.20% Class B 1.20% Class C 1.20% Class D 1.20% Class R 1.20% Institutional Service Class 1.20% Institutional Class 1.20% Gartmore Money Market Fund+? Class C 0.59% Prime 0.59% Service 0.59% Institutional 0.59% Gartmore Small Cap Leaders Fund Class A 1.35% Class B 1.35% Class C 1.35% Class R 1.35% Institutional Service Class 1.35% Institutional Class 1.35% Gartmore China Opportunities Fund Class A 1.75% Class B 1.75% Class C 1.75% Class R 1.75% Institutional Service Class 1.75% Institutional Class 1.75% |
Gartmore Global Natural Resources Fund Class A 1.20% Class B 1.20% Class C 1.20% Class R 1.20% Institutional Service Class 1.20% Institutional Class 1.20% Gartmore Optimal Allocations Fund: Growth (formerly Gartmore Optimal Allocations Fund: Aggressive) Class A 0.25% Class B 0.25% Class C 0.25% Class R 0.25% Institutional Service Class 0.25% Institutional Class 0.25% Gartmore Optimal Allocations Fund: Moderate Growth (formerly Gartmore Optimal Allocations Fund: Moderately Aggressive) Class A 0.25% Class B 0.25% Class C 0.25% Class R 0.25% Institutional Service Class 0.25% Institutional Class 0.25% Gartmore Optimal Allocations Fund: Moderate (formerly Gartmore Actively Managed Moderate Asset Allocation Fund) Class A 0.25% Class B 0.25% Class C 0.25% Class R 0.25% Institutional Service Class 0.25% Institutional Class 0.25% Gartmore Optimal Allocations Fund: Specialty (formerly Gartmore Actively Managed Specialty Asset Allocation Fund) Class A 0.25% Class B 0.25% Class C 0.25% Class R 0.25% Institutional Service Class 0.25% Institutional Class 0.25% |
Gartmore Optimal Allocations Fund: Defensive Class A 0.25% Class B 0.25% Class C 0.25% Class R 0.25% Institutional Service Class 0.25% Institutional Class Shares 0.25% Gartmore Emerging Markets Fund Class A 1.55% Class B 1.55% Class C 1.55% Class R 1.55% Institutional Service Class 1.55% Institutional Class Shares 1.55% Gartmore International Growth Fund Class A 1.40% Class B 1.40% Class C 1.40% Class R 1.40% Institutional Service Class 1.40% Institutional Class Shares 1.40% Gartmore Worldwide Leaders Fund Class A 1.40% Class B 1.40% Class C 1.40% Class R 1.40% Institutional Service Class 1.40% Institutional Class Shares 1.40% Gartmore Global Financial Services Fund Class A 1.40% Class B 1.40% Class C 1.40% Class R 1.40% Institutional Service Class 1.40% Institutional Class Shares 1.40% Gartmore Global Utilities Fund Class A 1.20% Class B 1.20% Class C 1.20% Class R 1.20% Institutional Service Class 1.20% Institutional Class Shares 1.20% |
Gartmore Hedged Core Equity Fund Class A 1.65% Class B 1.65% Class C 1.65% Class R 1.65% Institutional Service Class 1.65% Institutional Class Shares 1.65% Gartmore Small Cap Growth Opportunities Fund Class A 1.35% Class B 1.35% Class C 1.35% Class R 1.35% Institutional Service Class 1.35% Institutional Class Shares 1.35% Gartmore Small Cap Value Fund Class A 1.35% Class B 1.35% Class C 1.35% Class R 1.35% Institutional Service Class 1.35% Institutional Class Shares 1.35% Gartmore Small Cap Core Fund Class A 1.25% Class B 1.25% Class C 1.25% Class R 1.25% Institutional Service Class 1.25% Institutional Class Shares 1.25% Gartmore Market Neutral Fund Class A 1.65% Class B 1.65% Class C 1.65% Class R 1.65% Institutional Service Class 1.65% Institutional Class Shares 1.65% Gartmore U.S. Growth Leaders Long-Short Fund Class A 1.65% Class B 1.65% Class C 1.65% Class R 1.65% Institutional Service Class 1.65% Institutional Class Shares 1.65% |
*Effective February 28, 2007 until at least February 28, 2008. These expense limitations may be revised, after the expiration of the agreed upon term, if mutually agreed upon by the parties. They may also be revised to increase the limitations at anytime if mutually agreed upon by the parties.
+With respect to all classes of the Gartmore Money Market Fund, effective until at least May 1, 2008.
? In addition, with respect to the Service Class of the Gartmore Money Market Fund, effective until at least February 28, 2008, the Fund Operating Expenses shall be limited to 0.75% and shall include the Rule 12b-1 fees and fees paid pursuant to an Administrative Services Plan.
GARTMORE MUTUAL FUNDS
Title:
GARTMORE MUTUAL FUND CAPITAL TRUST
Title:
EX-99(h)(4)
EXPENSE LIMITATION AGREEMENT
GARTMORE ENHANCED INCOME FUND
(formerly Gartmore Morley Enhanced Income Fund)
EXPENSE LIMITATION AGREEMENT, effective as of February 28, 2007, by and between GARTMORE MORLEY CAPITAL MANAGEMENT, INC. (formerly Morley Capital Management, Inc.) (the "Investment Adviser") and GARTMORE MUTUAL FUNDS (formerly Nationwide Mutual Funds), a Delaware statutory trust (the "Trust"), on behalf of the Gartmore Enhanced Income Fund (formerly Gartmore Morley Enhanced Income Fund) (the "Fund").
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open end-diversified management company of the series type, and theFund is a series of the Trust; and
WHEREAS, the Trust and the Investment Adviser have entered into an Investment Advisory Agreement (the "Advisory Agreement"), pursuant to which the Investment Adviser renders investment advisory services to the Fund for compensation based on the value of the average daily net assets of the Fund; and
WHEREAS, the Trust and the Investment Adviser have determined that it is appropriate and in the best interests of the Fund and its shareholders to maintain the expenses of the Fund at a level below the level to which the Fund would normally be subject during its start-up period.
NOW, THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the aggregate expenses incurred by the Fund or a class of the Fund in any fiscal year, including but not limited to investment advisory fees of the Investment Adviser (but excluding interest, taxes, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, Rule 12b-1 fees, fees paid pursuant to an Administrative Services Plan, short sale dividend expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles, expenses incurred by the Fund in connection with any merger or reorganization, and other non-routine expenses not incurred in the ordinary course of the Fund's business) ("Fund Operating Expenses"), exceed the Operating Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be the liability of the Investment Adviser.
1.2. Operating Expense Limit. The Operating Expense Limit in any year
shall be a percentage of the average daily net assets of each class of the Fund
as described in Exhibit A, or such other rate as may be agreed to in writing by
the parties. The parties hereby agree that the Operating Expenses Limit
described in Exhibit A will not be increased before the date listed on Exhibit
A.
1.3. Method of Computation. To determine the Investment Adviser's liability with respect to the Excess Amount, each day the Fund Operating Expenses shall be annualized as of that day for each class of the Fund. If the annualized Fund Operating Expenses for any day exceed the Operating Expense Limit of the Fund class, the Investment Adviser shall (i) on a daily basis waive or reduce its advisory fee for such month by an amount sufficient to reduce the annualized Fund Operating Expenses to an amount which does not exceed the Operating Expense Limit and/or (ii) on a monthly basis remit to the Fund an amount that, together with the waived or reduced advisory fee, is sufficient to satisfy such Excess Amount.
1.4. Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the amount of the advisory fees waived or reduced and other payments remitted by the Investment Adviser to the Fund with respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If in any fiscal year during which total Fund
assets are greater than $100 million and in which the Investment Advisory
Agreement is still in effect, the estimated aggregate Fund Operating Expenses
for the fiscal year are less than the Operating Expense Limit for that year,
subject to quarterly approval by the Trust's Board of Trustees as provided in
Section 2.2 below, the Investment Adviser shall be entitled to reimbursement by
the Fund, in whole or in part as provided below, of the advisory fees waived or
reduced and other payments remitted by the Investment Adviser to the Fund
pursuant to Section 1 hereof. The total amount of reimbursement to which the
Investment Adviser may be entitled (the "Reimbursement Amount") shall equal, at
any time, the sum of all advisory fees previously waived or reduced by the
Investment Adviser and all other payments remitted by the Investment Adviser to
the Fund or a class of the Fund (as appropriate), pursuant to Section 1 hereof,
during any of the previous five (5) fiscal years less any reimbursement
previously paid by such Fund to the Investment Adviser, pursuant to Sections 2.2
or 2.3 hereof, with respect to such waivers, reductions, and payments. The
Reimbursement Amount shall not include any additional charges or fees
whatsoever, including, e.g., interest accruable on the Reimbursement Amount.
2.2. Board Approval. No reimbursement shall be paid to the Investment Adviser pursuant to this provision in any fiscal year, unless the Trust's Board of Trustees has determined that the payment of such reimbursement is appropriate in light of the terms of the this Agreement. The Trust's Board of Trustees shall determine quarterly in advance whether any reimbursement may be paid to the Investment Adviser in such quarter.
2.3. Method of Computation. To determine the Fund's payments, if any, to reimburse the Investment Adviser for all or any portion of the Reimbursement Amount, each month the Fund Operating Expenses for each Fund shall be annualized as of the last day of the month. If the annualized Fund Operating Expenses for any month are less than the Operating Expense Limit for that class for that year, the Fund, only with the prior approval of the Board, shall pay to the Investment Adviser an amount sufficient to increase the annualized Fund Operating Expenses to an amount no greater than the Operating Expense Limit for that year, provided that such amount paid to the Investment Adviser will in no event exceed the total Reimbursement Amount. If the annualized Fund Operating Expenses for the Fund are greater than the Operating Expense Limit for one or more months in a quarter and less the remaining month(s), the calculation described in this section will be made on a monthly basis and the net amount of the monthly calculations will be presented to the Board for approval.
2.4. Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the actual Fund Operating Expenses for the prior fiscal year (including any reimbursement payments hereunder with respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall continue in effect for the period listed on Exhibit A for any Fund covered by the Agreement and then unless this Agreement is terminated earlier as provided below, from year to year thereafter provided such continuance is specifically approved by a majority of the Trustees of the Trust who (i) are not "interested persons" of the Trust or any other party to this Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect financial interest in the operation of this Agreement ("Non-Interested Trustees"), provided however, that the reimbursements described in Section 2 will not continue for more than five years after the Fund's commencement of operations. In order to terminate the Agreement, the Investment Adviser must give at least 30 days' prior written notice to the Trust prior to the end of the period listed on Exhibit A or the end of the annual renewal. Regardless of any other termination provisions, the provisions contained in Section 2 of this Agreement relating to the reimbursement of the Investment Adviser for fee waivers and expense reimbursements previously made by the Investment Adviser on behalf of the Fund shall survive the termination of the Agreement.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require the Trust or the Fund to take any action contrary to the Trust's Agreement and Declaration of Trust or By-Laws, or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Trust's Board of Trustees of its responsibility for and control of the conduct of the affairs of the Trust or the Fund.
4.3. Definitions. Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment advisory fee, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Advisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above written.
GARTMORE MUTUAL FUNDS
(formerly Nationwide Mutual Funds)
Title:
GARTMORE MORLEY CAPITAL MANAGEMENT, INC.
(formerly Morley Capital Management, Inc.)
Title:
EXHIBIT A
to the Amended and Restated
Expense Limitation Agreement between
GARTMORE MUTUAL FUNDS
and
GARTMORE MORLEY CAPITAL MANAGEMENT, INC.
Amended, January 11, 2007*
Name of Fund/Class Expense Limitation for Fund/Class
Gartmore Enhanced Income Fund
(formerly Gartmore Morley Enhanced Income Fund)
Institutional Service Class 0.45%
Class A 0.45%
Institutional Class 0.45%
Class R 0.45%
|
*Effective February 28, 2007 and effective until May 1, 2008. These expense limitations may be revised to decrease the limitations after the expiration of the agreed upon term, if mutually agreed upon by the parties. They may also be revised to increase the limitations at any time if mutually agreed upon by the parties.
GARTMORE MUTUAL FUNDS
By:___________________________________
Name:
Title:
GARTMORE MORLEY CAPITAL MANAGEMENT, INC.
By:___________________________________
Name:
Title:
EX-99(h)(5)
EXPENSE LIMITATION AGREEMENT
GARTMORE SHORT DURATION BOND FUND
(formerly Gartmore Morley Capital Accumulation Fund)
EXPENSE LIMITATION AGREEMENT, effective as of February 28, 2007, by and between GARTMORE MORLEY CAPITAL MANAGEMENT, INC. (formerly Morley Capital Management, Inc.) (the "Investment Adviser") and GARTMORE MUTUAL FUNDS (formerly Nationwide Mutual Funds) (the "Trust"), a Delaware statutory trust, on behalf of the GARTMORE SHORT DURATION BOND FUND (the "Fund").
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open end management company of the series type, and the Fund is a series of the Trust; and
WHEREAS, the Trust and the Investment Adviser have entered into an Investment Advisory Agreement (the "Advisory Agreement"), pursuant to which the Investment Adviser renders investment advisory services to the Fund for compensation based on the value of the average daily net assets of the Fund; and
WHEREAS, the Trust and the Investment Adviser have determined that it is appropriate and in the best interests of the Fund and its shareholders to maintain the expenses of the Fund at a level below the level to which the Fund would otherwise be subject.
NOW, THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the aggregate expenses incurred by the Fund or a class of the Fund in any fiscal year, including but not limited to investment advisory fees of the Investment Adviser (but excluding interest, taxes, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, Rule 12b-1 fees, fees paid pursuant to an Administrative Services Plan, wrapper fees, premiums and expenses related to wrapper agreements for the Fund, short sale dividend expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles, expenses incurred by the Fund in connection with any merger or reorganization and other non-routine expenses not incurred in the ordinary course of the Fund's business) ("Fund Operating Expenses"), exceed the Operating Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be the liability of the Investment Adviser.
1.2. Operating Expense Limit. The Operating Expense Limit in any year shall be a percentage of the average daily net assets of each class of the Fund as described in Exhibit A, or such other rate as may be agreed to in writing by the parties. The parties hereby agree that Operating Expense Limit described in Exhibit A will not be increased before the date listed on Exhibit A.
1.3. Method of Computation. To determine the Investment Adviser's liability with respect to the Excess Amount, each day the Fund Operating Expenses shall be annualized as of that day for each class of the Fund. If the annualized Fund Operating Expenses for any day exceed the Operating Expense Limit of the Fund class, the Investment Adviser shall (i) on a daily basis waive or reduce its advisory fee for such month by an amount sufficient to reduce the annualized Fund Operating Expenses to an amount which does not exceed the Operating Expense Limit and/or (ii) on a monthly basis remit to the Fund an amount that, together with the waived or reduced advisory fee, is sufficient to satisfy such Excess Amount.
1.4. Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the amount of the advisory fees waived or reduced and other payments remitted by the Investment Adviser to the Fund with respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If in any fiscal year during which total Fund
assets are greater than $100 million and in which the Investment Advisory
Agreement is still in effect, the estimated aggregate Fund Operating Expenses
for the fiscal year are less than the Operating Expense Limit for that year,
subject to quarterly approval by the Trust's Board of Trustees as provided in
Section 2.2 below, the Investment Adviser shall be entitled to reimbursement by
the Fund, in whole or in part as provided below, of the advisory fees waived or
reduced and other payments remitted by the Investment Adviser to the Fund
pursuant to Section 1 hereof. The total amount of reimbursement to which the
Investment Adviser may be entitled (the "Reimbursement Amount") shall equal, at
any time, the sum of all advisory fees previously waived or reduced by the
Investment Adviser and all other payments remitted by the Investment Adviser to
the Fund or to a class of the Fund (as appropriate), pursuant to Section 1
hereof, less any reimbursement previously paid by such Fund to the Investment
Adviser, pursuant to Sections 2.2 or 2.3 hereof, with respect to such waivers,
reductions, and payments; provided, however, that no Reimbursement Amount shall
be paid at a date more than three (3) years after the fiscal year when the
Investment Adviser waived investment advisory fees or reimbursed other expenses
to the Fund or a class of the Fund for the corresponding Excess Amount pursuant
to Section 1. The Reimbursement Amount shall not include any additional charges
or fees whatsoever, including, e.g., interest accruable on the Reimbursement
Amount.
2.2. Board Approval. No reimbursement shall be paid to the Investment Adviser pursuant to this provision in any fiscal year, unless the Trust's Board of Trustees has determined that the payment of such reimbursement is appropriate in light of the terms of this Agreement. The Trust's Board of Trustees shall determine quarterly in advance whether any portion of the Reimbursement Amount may be paid to the Investment Adviser in such quarter.
2.3. Method of Computation. To determine the Fund's payments, if any, to reimburse the Investment Adviser for all or any portion of the Reimbursement Amount, each month the Fund Operating Expenses for each Fund class shall be annualized as of the last day of the month. If the annualized Fund Operating Expenses for any month are less than the Operating Expense Limit for that class for that year, the Fund, only with the prior approval of the Board, shall pay to the Investment Adviser an amount sufficient to increase the annualized Fund Operating Expenses to an amount no greater than the Operating Expense Limit for that year, provided that such amount paid to the Investment Adviser will not exceed the total Reimbursement Amount. If the annualized Fund Operating Expenses for the Fund are greater than the Operating Expense Limit for one or more months in a quarter and less than the remaining month(s), the calculation described in this section will be made on a monthly basis and the net amount of the monthly calculations will be presented to the Board for approval.
2.4. Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the actual Fund Operating Expenses for the prior fiscal year (including any reimbursement payments hereunder with respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall continue in effect for the period listed on Exhibit A for the Fund covered by the Agreement and unless this Agreement is terminated earlier as provided below, from year to year thereafter provided such continuance is specifically approved by a majority of the Trustees of the Trust who (i) are not "interested persons" of the Trust or any other party to this Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect financial interest in the operation of this Agreement ("Non-Interested Trustees"), provided however, that the reimbursements described in Section 2 will not continue to accrue for more than three years after the fiscal year when the Investment Adviser waived investment advisory fees or reimbursed other expenses to the Fund for the corresponding Excess Amount pursuant to Section 1. In order to terminate the Agreement, the Investment Adviser must give at least 30 days' prior written notice to the Trust prior to the end of the period listed on Exhibit A or the end of the annual renewal. Regardless of any other termination provisions, the provisions contained in Section 2 of this Agreement relating to the reimbursement of the Investment Adviser for fee waivers and expense reimbursements previously made by the Investment Adviser on behalf of the Fund shall survive the termination of the Agreement.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require the Trust or the Fund to take any action contrary to the Trust's Agreement and Declaration of Trust or By-Laws, or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Trust's Board of Trustees of its responsibility for and control of the conduct of the affairs of the Trust or the Fund.
4.3. Definitions. Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment advisory fee, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Advisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above written.
GARTMORE MUTUAL FUNDS
Title:
GARTMORE MORLEY CAPITAL MANAGEMENT, INC.
Title:
EXHIBIT A
to the Expense Limitation Agreement between
GARTMORE MUTUAL FUNDS
and
GARTMORE MORLEY CAPITAL MANAGEMENT, INC.
Amended, January 11, 2007*
Name of Fund/Class Expense Limitation for Fund/Class
Gartmore Short Duration Bond Fund
(formerly, Gartmore Morley Capital Accumulation Fund)
Class A 0.55%
Service Class 0.55%
IRA Class 0.55%
Institutional Class 0.55%
Class C 0.55%
----------------
|
*Effective February 28, 2007 until at least February 28, 2008. These expense limitations may be revised to decrease the limitations after the expiration of the agreed upon term, if mutually agreed upon by the parties. They may also be revised to increase the limitations at any time if mutually agreed upon by the parties.
EX-99(h)(6)
EXPENSE LIMITATION AGREEMENT
GARTMORE MUTUAL FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of February 28, 2007, by and between GARTMORE MUTUAL FUND CAPITAL TRUST (the Investment Adviser") and GARTMORE MUTUAL FUNDS, a Delaware statutory trust (the "Trust"), on behalf of each of the funds listed on Exhibit A (each, a "Fund").
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open end-diversified management company of the series type, and each Fund is a separate series of the Trust; and
WHEREAS, the Trust and the Investment Adviser have entered into an Investment Advisory Agreement (the "Advisory Agreement"), pursuant to which the Investment Adviser renders investment advisory services to each Fund for compensation based on the value of the average daily net assets of that Fund; and
WHEREAS, the Trust and the Investment Adviser have determined that it is appropriate and in the best interests of each Fund and its shareholders to maintain the expenses of the Fund at a level below the level to which that Fund would normally be subject during its start-up period.
NOW, THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the aggregate expenses incurred by the Fund in any fiscal year, including but not limited to investment advisory fees of the Investment Adviser (but excluding interest, taxes, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, Rule 12b-1 fees, fees paid pursuant to an Administrative Services Plan, short sale dividend expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles, expenses incurred by a Fund in connection with any merger or reorganization, and other non-routine expenses not incurred in the ordinary course of the Fund's business) ("Fund Operating Expenses"), exceed the Operating Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be the liability of the Investment Adviser.
1.2. Operating Expense Limit. The Operating Expense Limit in any year shall be a percentage of the average daily net assets of each class of the Fund as described in Exhibit A, or such other rate as may be agreed to in writing by the parties. The parties hereby agree that Operating Expense Limit described in Exhibit A initially will not be increased before the date listed on Exhibit A.
1.3. Method of Computation - Non-Daily Dividend Funds. To determine the
Investment Adviser's liability with respect to the Excess Amount for Funds that
do not accrue daily dividends, each month the Fund Operating Expenses shall be
annualized as of the last day of the month for each class of a Fund. If the
annualized Fund Operating Expenses for any month exceed the Operating Expense
Limit of a Fund class, the Investment Adviser shall (i) waive or reduce its
advisory fee by an amount sufficient to reduce the annualized Fund Operating
Expenses to an amount that does not exceed the Operating Expense Limit, and/or
(ii) remit to a Fund an amount that, together with the waived or reduced
advisory fee, is sufficient to satisfy such Excess Amount.
1.4 Method of Computation - Daily Dividend Funds. To determine the Investment Adviser's liability with respect to the Excess Amount for Funds that accrue daily dividends (a "Daily Dividend Fund"), each day the Fund Operating Expenses shall be annualized as of that day for each class of a Daily Dividend Fund. If the annualized Fund Operating Expenses for any day exceed the Operating Expense Limit of a Daily Dividend Fund class, the Investment Adviser shall (i) on a daily basis waive or reduce its advisory fee for such month by an amount sufficient to reduce the annualized Fund Operating Expenses to an amount which does not exceed the Operating Expense Limit and/or (ii) on a monthly basis remit to a Fund an amount that, together with the waived or reduced advisory fee, is sufficient to satisfy such Excess Amount.
1.5 Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the amount of the advisory fees waived or reduced and other payments remitted by the Investment Adviser to a Fund with respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If in any fiscal year during which total Fund
assets are greater than $100 million and in which the Investment Advisory
Agreement is still in effect, the estimated aggregate Fund Operating Expenses
for the fiscal year are less than the Operating Expense Limit for that year,
subject to quarterly approval by the Trust's Board of Trustees as provided in
Section 2.2 below, the Investment Adviser shall be entitled to reimbursement by
a Fund, in whole or in part as provided below, of the advisory fees waived or
reduced and other payments remitted by the Investment Adviser to the Fund
pursuant to Section 1 hereof. The total amount of reimbursement to which the
Investment Adviser may be entitled (the "Reimbursement Amount") shall equal, at
any time, the sum of all advisory fees previously waived or reduced by the
Investment Adviser and all other payments remitted by the Investment Adviser to
a Fund or a class of a Fund (as appropriate), pursuant to Section 1 hereof,
during any of the previous five (5) fiscal years less any reimbursement
previously paid by such Fund to the Investment Adviser, pursuant to Sections 2.2
or 2.3 hereof, with respect to such waivers, reductions, and payments. The
Reimbursement Amount shall not include any additional charges or fees
whatsoever, including, e.g., interest accruable on the Reimbursement Amount.
2.2. Board Approval. No portion of the Reimbursement Amount shall be paid to the Investment Adviser pursuant to this provision in any fiscal year, unless the Trust's Board of Trustees has determined that the payment of such reimbursement is appropriate in light of the terms of the this Agreement. The Trust's Board of Trustees shall determine quarterly in advance whether any portion of the Reimbursement Amount may be paid to the Investment Adviser in such quarter.
2.3. Method of Computation. To determine a Fund's payments, if any, to reimburse the Investment Adviser for all or any portion of the Reimbursement Amount, each month the Fund Operating Expenses for each Fund shall be annualized as of the last day of the month. If the annualized Fund Operating Expenses for any month are less than the Operating Expense Limit for that class for that year, a Fund, only with the prior approval of the Board, shall pay to the Investment Adviser an amount sufficient to increase the annualized Fund Operating Expenses to an amount no greater than the Operating Expense Limit for that year, provided that such amount paid to the Investment Adviser will in no event exceed the total Reimbursement Amount. If the annualized Fund Operating Expenses for a Fund are greater than the Operating Expense Limit for one or more months in a quarter and less the remaining month(s), the calculation described in this section will be made on a monthly basis and the net amount of the monthly calculations will be presented to the Board for approval.
2.4. Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the actual Fund Operating Expenses for the prior fiscal year (including any reimbursement payments hereunder with respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall continue in effect for the period listed on Exhibit A for any Fund covered by the Agreement and then unless this Agreement is terminated earlier as provided below, from year to year thereafter provided such continuance is specifically approved by a majority of the Trustees of the Trust who (i) are not "interested persons" of the Trust or any other party to this Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect financial interest in the operation of this Agreement ("Non-Interested Trustees"), provided however, that the reimbursements described in Section 2 will not continue for more than five years after a Fund's commencement of operations. In order to terminate the Agreement, the Investment Adviser must give at least 30 days' prior written notice to the Trust prior to the end of the period listed on Exhibit A or the end of the annual renewal. Regardless of any other termination provisions, the provisions contained in Section 2 of this Agreement relating to the reimbursement of the Investment Adviser for fee waivers and expense reimbursements previously made by the Investment Adviser on behalf of the Fund shall survive the termination of the Agreement.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require the Trust or a Fund to take any action contrary to the Trust's Agreement and Declaration of Trust or By-Laws, or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Trust's Board of Trustees of its responsibility for and control of the conduct of the affairs of the Trust or the Fund.
4.3. Definitions. Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment advisory fee, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Advisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above written.
GARTMORE MUTUAL FUNDS
Name:
Title:
GARTMORE MUTUAL FUND CAPITAL TRUST
Name:
Title:
EXHIBIT A
to the Expense Limitation Agreement between
GARTMORE MUTUAL FUNDS and
GARTMORE MUTUAL FUND CAPITAL TRUST
Amended, January 11, 2007*
Name of Fund/Class Expense Limitation for Fund/Class
Gartmore Large Cap Value Fund
(formerly Prestige Large Cap Value Fund
and Nationwide Large Cap Value Fund)
Class A 1.15%
Class B 1.15%
Class C 1.15%
Class R 1.15%
Institutional Service Class 1.15%
Institutional Class 1.15%
Gartmore Global Technology and Communications Fund
Class A 1.38%
Class B 1.38%
Class C 1.38%
Class R 1.38%
Institutional Service Class 1.38%
Institutional Class 1.38%
Gartmore Global Health Sciences Fund
Class A 1.40%
Class B 1.40%
Class C 1.40%
Class R 1.40%
Institutional Service Class 1.40%
Institutional Class 1.40%
NorthPointe Small Cap Value Fund
Institutional Class 1.00%
Gartmore Value Opportunities Fund (formerly Nationwide Value Opportunities Fund)
Class A 1.10%
Class B 1.10%
Class C 1.10%
Class R 1.10%
Institutional Service Class 1.10%
Institutional Class 1.10%
|
Gartmore U.S. Growth Leaders Fund (formerly Gartmore Growth 20 Fund)
Class A 1.30%
Class B 1.30%
Class C 1.30%
Class R 1.30%
Institutional Service Class 1.30%
Institutional Class 1.30%
Gartmore Nationwide Leaders Fund
Class A 1.20%
Class B 1.20%
Class C 1.20%
Class R 1.20%
Institutional Service Class 1.20%
Institutional Class 1.20%
Gartmore Micro Cap Equity Fund
Class A 1.65%
Class B 1.65%
Class C 1.65%
Class R 1.65%
Institutional Service Class 1.65%
Institutional Class 1.65%
Each of the Asset Allocation Funds (Gartmore Investor Destinations Aggressive Fund, Gartmore Investor Destinations
Moderately Aggressive Fund, Gartmore Investor Destinations Moderate Fund, Gartmore Investor Destinations Moderately
Conservative Fund, Gartmore Investor Destinations Conservative Fund)
Class A 4.00%**
Class B 4.00%**
Class C 4.00%**
Service Class 4.00%**
Class A 0.25%
Class B 0.25%
Class C 0.25%
Class R 0.25%
Service Class 0.25%
Institutional Class Shares 0.25%
Gartmore S&P 500 Index Fund(1)
(Formerly Nationwide S&P 500 Index Fund)
Class A 0.23%
Class B 0.23%
Class C 0.23%
Class R 0.23%
Local Fund Shares 0.23%
Service Class 0.23%
Institutional Service Class 0.23%
Institutional Class 0.23%
|
Gartmore Small Cap Index Fund(1)
Class A 0.30%
Class B 0.30%
Class C 0.30%
Class R 0.30%
Institutional Class 0.30%
Class A 4.00%**
Class B 4.00%**
Class C 4.00%**
Institutional Class 4.00%**
Gartmore Mid Cap Market Index Fund(1)
(formerly Nationwide Mid Cap Index Fund)
Class A 0.32%
Class B 0.32%
Class C 0.32%
Class R 0.32%
Institutional Class 0.32%
Gartmore International Index Fund(1)
(formerly Nationwide International Index Fund)
Class A 0.37%
Class B 0.37%
Class C 0.37%
Class R 0.37%
Institutional Class 0.37%
Class A 4.00%**
Class B 4.00%**
Class C 4.00%**
Institutional Class 4.00%**
Gartmore Bond Index Fund(1)
(Formerly Nationwide Index Fund)
Class A 0.32%
Class B 0.32%
Class C 0.32%
Class R 0.32%
Institutional Class 0.32%
Class A 4.00%**
Class B 4.00%**
Class C 4.00%**
Institutional Class 4.00%**
|
*Effective February 28, 2007 until at least February 28, 2008. These expense limitations may be revised to decrease the limitations after the expiration of the agreed upon term, if mutually agreed upon by the parties. They may also be revised to increase the limitations at any time if mutually agreed upon by the parties.
(1) With respect to the Gartmore S&P 500 Index, Gartmore Small Cap Index, Gartmore Mid Cap Market Index, Gartmore International Index, Gartmore Bond Index and Gartmore Enhanced Income Funds, effective through at least May 1, 2008.
**Effective until at least March 1, 2011.
EX-99(h)(7)
EXPENSE LIMITATION AGREEMENT
GARTMORE MUTUAL FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of February 28, 2007, by and between GARTMORE MUTUAL FUNDS (the "Trust"), GARTMORE MUTUAL FUND CAPITAL TRUST (the "Investment Adviser") and NORTHPOINTE CAPITAL, LLC (the "Subadviser"), on behalf of the fund listed on Exhibit A (the "Fund").
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open end management company of the series type, and the Fund is a separate series of the Trust; and
WHEREAS, the Trust and the Investment Adviser have entered into an Investment Advisory Agreement (the "Advisory Agreement"), pursuant to which the Investment Adviser renders investment advisory services to each Fund for compensation based on the value of the average daily net assets of that Fund; and
WHEREAS, the Investment Adviser and Subadviser have entered into a Subadvisory Agreement (the "Subadvisory Agreement"), pursuant to which the Subadviser renders investment advisory services to certain funds of the Trust, including the Fund and pursuant to which the Investment Adviser pays 100% of the investment management fee it receives pursuant to the Advisory Agreement to the Subadviser; and
WHEREAS, the Trust, Investment Adviser and Subadviser have determined that it is appropriate to maintain the expenses of the Fund at a level below the level to which that Fund would otherwise be subject;
NOW, THEREFORE, the Trust, the Investment Adviser and the Subadviser hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the aggregate expenses incurred by a Fund or a class of a Fund in any fiscal year, including but not limited to investment advisory fees of the Investment Adviser (including Subadviser) (but excluding interest, taxes, brokerage commissions and other costs incurred in connection with the purchase and sale of portfolio securities, Rule 12b-1 fees, fees paid pursuant to an Administrative Services Plan, short sale dividend expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles, expenses incurred by a Fund in connection with any merger or reorganization, and other non-routine expenses not incurred in the ordinary course of the Fund's business) ("Fund Operating Expenses"), exceed the Operating Expense Limit, as defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be the liability of the Subadviser.
1.2. Operating Expense Limit. The Operating Expense Limit in any year shall be a percentage of the average daily net assets of each class of the Fund as described in Exhibit A, or such other rate as may be agreed to in writing by the parties. The parties hereby agree that Operating Expense Limit described in Exhibit A will not be increased before the date listed on Exhibit A.
1.3. Method of Computation--Non-Daily Dividend Funds. To determine the Subadviser's liability with respect to the Excess Amount for Funds that do not accrue daily dividends, each month the Fund Operating Expenses shall be annualized as of the last day of the month for each class of a Fund. If the annualized Fund Operating Expenses for any month exceed the Operating Expense Limit of a Fund class, the Subadviser and Investment Adviser shall (i) waive or reduce the subadvisory and advisory fees by an amount sufficient to reduce the annualized Fund Operating Expenses to an amount which does not exceed the Operating Expense Limit, and/or (ii) remit to the Fund an amount that, together with the waived or reduced advisory fee, is sufficient to satisfy such Excess Amount.
1.4 Method of Computation - Daily Dividend Funds. To determine the Subdviser's liability with respect to the Excess Amount for Funds that accrue daily dividends (a "Daily Dividend Fund"), each day the Fund Operating Expenses shall be annualized as of that day for each class of a Daily Dividend Fund. If the annualized Fund Operating Expenses for any day exceed the Operating Expense Limit of a Daily Dividend Fund class, the Investment Adviser shall (i) on a daily basis waive or reduce its advisory fee for such month by an amount sufficient to reduce the annualized Fund Operating Expenses to an amount which does not exceed the Operating Expense Limit and/or (ii) on a monthly basis remit to a Fund an amount that, together with the waived or reduced advisory fee, is sufficient to satisfy such Excess Amount.
1.5 Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the amount of the subadvisory fees waived or reduced and other payments remitted by the Subadviser to the Fund with respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1. Reimbursement. If in any fiscal year during which total Fund
assets are greater than $100 million and in which the Investment Advisory
Agreement and Subadvisory Agreement are still in effect, the estimated aggregate
Fund Operating Expenses for the fiscal year are less than the Operating Expense
Limit for that year, subject to quarterly approval by the Trust's Board of
Trustees as provided in Section 2.2 below, the Subadviser shall be entitled to
reimbursement, in whole or in part as provided below, of the subadvisory fees
waived or reduced and other payments remitted by the Subadviser pursuant to
Section 1 hereof. The total amount of reimbursement to which the Subadviser may
be entitled (the "Reimbursement Amount") shall equal, at any time, the sum of
all subadvisory fees previously waived or reduced by the Subadviser and all
other payments remitted by the Subadviser to a Fund or a class of a Fund (as
appropriate), pursuant to Section 1 hereof, less any reimbursement previously
paid by such Fund to the Subadviser, pursuant to Sections 2.2 or 2.3 hereof,
with respect to such waivers, reductions, and payments; provided, however, that
no Reimbursement Amount shall be paid at a date more than three (3) years after
the fiscal year when the Subadviser waived subadvisory fees or reimbursed other
expenses to a Fund or a class of a Fund for the corresponding Excess Amount
pursuant to Section 1. The Reimbursement Amount shall not include any additional
charges or fees whatsoever, including, e.g., interest accruable on the
Reimbursement Amount.
2.2. Board Approval. No reimbursement shall be paid to the Subadviser pursuant to this provision in any fiscal year, unless the Trust's Board of Trustees has determined that the payment of such reimbursement is appropriate in light of the terms of the Agreement. The Trust's Board of Trustees shall determine quarterly in advance whether any portion of the Reimbursement Amount may be paid in such quarter.
2.3. Method of Computation. To determine a Fund's payments, if any, to reimburse the Subadviser for all or any portion of the Reimbursement Amount, each month the Fund Operating Expenses for each Fund class shall be annualized as of the last day of the month. If the annualized Fund Operating Expenses for any month are less than the Operating Expense Limit for that class for that year, a Fund, only with the prior approval of the Board, shall pay to the Subadviser an amount sufficient to increase the annualized Fund Operating Expenses to an amount no greater than the Operating Expense Limit for that year, provided that such amount paid to the Subadviser will not exceed the total Reimbursement Amount. If the annualized Fund Operating Expenses for a Fund are greater than the Operating Expense Limit for one or more months in a quarter and less than the remaining month(s), the calculation described in this section will be made on a monthly basis and the net amount of the monthly calculations will be presented to the Board for approval.
2.4. Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the actual Fund Operating Expenses for the prior fiscal year (including any reimbursement payments hereunder with respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall continue in effect for the period listed on Exhibit A for any Fund covered by the Agreement and then unless this Agreement is terminated earlier as provided below, from year to year thereafter provided such continuance is specifically approved by a majority of the Trustees of the Trust who (i) are not "interested persons" of the Trust or any other party to this Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect financial interest in the operation of this Agreement ("Non-Interested Trustees"), provided however, that the reimbursements described in Section 2 will not continue to accrue for more than three years after the fiscal year when the Subadviser waived subadvisory fees or reimbursed other expenses for the corresponding Excess Amount pursuant to Section 1. In order to terminate the Agreement, the Subadviser must give at least 30 days' prior written notice to the Investment Adviser and to the Fund prior to the end of the period listed on Exhibit A or the end of the annual renewal. Regardless of any other termination provisions, the provisions contained in Section 2 of this Agreement relating to the reimbursement of the Subadviser for fee waivers and expense reimbursements previously made by the Subadviser on behalf of the Fund shall survive the termination of the Agreement.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require the Trust or a Fund to take any action contrary to the Trust's Agreement and Declaration of Trust or By-Laws, or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Trust's Board of Trustees of its responsibility for and control of the conduct of the affairs of the Trust or the Fund.
4.3. Definitions. Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment advisory fee, the subadvisory fee, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Advisory Agreement, the Subadvisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Advisory Agreement, the Subadvisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above written.
GARTMORE MUTUAL FUNDS
Title:
GARTMORE MUTUAL FUND CAPITAL TRUST
Title:
NORTHPOINTE CAPITAL, LLC
Title:
EXHIBIT A
to the Expense Limitation Agreement between
GARTMORE MUTUAL FUNDS
GARTMORE MUTUAL FUND CAPITAL TRUST
and
NORTHPOINTE CAPITAL, LLC
Amended, January 11, 2007*
Name of Fund/Class Expense Limitation for Fund/Class
NorthPointe Small Cap Growth Fund
Class A 1.10%
Class B 1.10%
Class C 1.10%
Class R 1.10%
Institutional Service Class 1.10%
Institutional Class 1.10%
|
* Effective February 28, 2007 and effective until at least February 28, 2008. These expense limitations may be revised, after the expiration of the agreed upon term, if mutually agreed upon by the parties. They may also be revised to increase the limitations at anytime if mutually agreed upon by the parties.
GARTMORE MUTUAL FUNDS
Title:
GARTMORE MUTUAL FUND CAPITAL TRUST
Title:
NORTHPOINTE CAPITAL, LLC
Title:
EX-99(h)(8)
FEE WAIVER AGREEMENT
GARTMORE MUTUAL FUNDS
FEE WAIVER AGREEMENT, effective as of February 28, 2007, by and between GARTMORE MUTUAL FUND CAPITAL TRUST (the "Investment Adviser") and GARTMORE MUTUAL FUNDS, a Delaware statutory trust (the "Trust"), on behalf of the Gartmore U.S. Growth Leaders Long-Short Fund (the "Fund").
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open end management company of the series type, and each Fund is a separate series of the Trust; and
WHEREAS, the Trust and the Investment Advisor have entered into an Investment Advisory Agreement (hereinafter, the "Advisory Agreement"), pursuant to which the Investment Advisor renders certain investment advisory services (as these services are identified in the Advisory Agreement) to the Fund for compensation based on the value of the average daily net assets of the Fund ("Management Fee"); and
WHEREAS, the Trust and the Investment Advisor have determined that it is appropriate and in the best interests of the Fund and the Fund's shareholders to maintain the expenses of the Fund at a level below the level to which the Fund would otherwise be subject.
NOW, THEREFORE, the parties hereto agree as follows:
1. Fee Waiver:
1.1. The Investment Adviser shall waive an amount equal to 0.25% from its Management Fee charged under the Advisory Agreement. The parties hereby agree that this waiver amount shall not be increased until at least February 28, 2008, except pursuant to the mutual agreement of the parties. The fee waiver amount may be decreased by mutual agreement of the parties after February 28, 2008.
2. Term and Termination of Agreement:
2.1. This Agreement initially shall continue until February 28, 2008 and from year-to-year thereafter.
3. Miscellaneous:
3.1. Captions. The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
3.2. Interpretation. Nothing herein contained shall be deemed to require the Trust or a Fund to take any action contrary to the Trust's Agreement and Declaration of Trust or By-Laws, or any applicable statutory or regulatory requirement to which the Trust or Fund is subject or by which the Trust or Fund is bound, or to relieve or deprive the Trust's Board of Trustees of the Board's responsibility for and control of the conduct of the affairs of the Trust or the Fund.
3.3. Definitions. Any question of interpretation of any term or provision of this Agreement, including, but not limited to, the Management Fee provided for in the Advisory Agreement, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Advisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to said Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective corporate seals to be hereunto affixed, as of the day and year first above written.
GARTMORE MUTUAL FUNDS
Title:
GARTMORE MUTUAL FUND CAPITAL TRUST
Title:
EX-99(i)
Law Offices
STRADLEY, RONON, STEVENS & YOUNG, LLP
1220 19th Street, NW, Suite 600
Washington, DC 20036
(202) 822-9611
February 28, 2007
Gartmore Mutual Funds
1200 River Road, Suite 1000
Conshohocken, PA 19428
Subject: GARTMORE MUTUAL FUNDS, A DELAWARE STATUTORY TRUST (THE
"TRUST")--POST-EFFECTIVE AMENDMENT NO. 86, AMENDMENT NO. 87 TO REGISTRATION STATEMENT ON FORM N-1A, TO BE FILED UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, EACH AS AMENDED (THE "POST-EFFECTIVE AMENDMENT")
Ladies and Gentlemen:
This opinion is given in connection with the filing of the above-referenced Post-Effective Amendment relating to an unlimited amount of authorized shares of beneficial interest, no par value, of all current series of the Trust.
In connection with our giving of this opinion, we have
examined: (i) a copy of the Trust's Certificate of Trust, as filed with the
Secretary of State of the State of Delaware on October 1, 2004; (ii) the Trust's
Amended and Restated Agreement and Declaration of Trust ("Declaration of Trust")
dated October 28, 2004, as further amended to date; (iii) the Trust's By-Laws;
(iv) a Good Standing Certificate, dated February 26, 2007, from the Secretary of
State of the State of Delaware; and (v) various other pertinent proceedings of
the Board of Trustees of the Trust (the "Board") as well as other documents and
items we deem material to this opinion.
The Trust is authorized by the Declaration of Trust to issue an unlimited number of shares of beneficial interest, all without par value. The Declaration of Trust authorizes the Board to designate any additional series and to allocate shares to separate series and to divide shares of any series into two or more classes and to issue classes of any series.
The Trust has filed with the U.S. Securities and Exchange Commission, a registration statement under the Securities Act, which registration statement is deemed to register an indefinite number of shares of
I # 228820 v.2
Gartmore Mutual Funds
February 28, 2007
the Trust pursuant to the provisions of Section 24(f) of the Investment Company Act of 1940, as amended (the "1940 Act"). You have further advised that the Fund has filed, and each year hereafter will timely file, a Notice pursuant to Rule 24f-2 under the 1940 Act, perfecting the registration of the shares sold by the series of the Trust during each fiscal year during which such registration of an indefinite number of shares remains in effect.
You have also informed us that the shares of the Trust have been, and will continue to be, sold in accordance with the Trust's usual method of distributing its registered shares, under which prospectuses are made available for delivery to offerees and purchasers of such shares in accordance with Section 5(b) of the Securities Act of 1933, as amended (the "Securities Act").
The following opinion is limited to the Federal Securities laws of the United States and the Delaware Statutory Trust Act governing the issuance of shares of the Trust only, and does not extend to other securities or "Blue Sky" laws or to other laws.
Based upon the foregoing information and examination, so long as the Trust remains a valid and subsisting statutory trust under the laws of its state of formation, and the registration of an indefinite number of shares of the Trust remains effective, the authorized shares of the series of the Trust, when issued for the consideration set by the Board pursuant to the Declaration of Trust and as described in this Post-Effective amendment, and subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid, and non-assessable shares, and the holders of such shares will have all of the rights provided for with respect to such holdings by the Declaration of Trust and the laws of the State of Delaware.
We hereby consent to the use of this opinion, in lieu of any other, as an exhibit to the Registration Statement of the Trust along with any amendments thereto, covering the registration of the shares of the Trust under the Securities Act and the applications, registration statements or notice filings, and amendments thereto, filed in accordance with the securities laws of the several states in which shares of the Trust are offered, and we further consent to references in the registration statement of the Trust to the fact that this opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY RONON STEVENS & YOUNG, LLP
BY: /S/ PETER M. HONG
-----------------
Peter M. Hong, a Partner
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I # 228820 v.2
PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our reports dated December 20, 2006, relating to the financial statements and financial highlights which appear in the October 31, 2006 Annual Report to Shareholders of Gartmore Mutual Funds, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Independent Registered Public Accounting Firm" in such Registration Statement.
PricewaterhouseCoopers, LLP
Philadelphia, Pennsylvania
February 28, 2007
EX-99(m)
DISTRIBUTION PLAN OF
GARTMORE MUTUAL FUNDS
Amended, January 11, 2007
to be effective February 28, 2007
Section 1. This Distribution Plan (the "Plan") constitutes the distribution plan for the following classes of the series (each, a "Fund") of Gartmore Mutual Funds (the "Trust"):
Fund Classes
Gartmore Mid Cap Growth Leaders Fund A, B, C, R
Gartmore Growth Fund A, B, C, R
Gartmore Nationwide Fund A, B, C, R
Gartmore Bond Fund A, B, C, R, X, Y
Gartmore Tax-Free Income Fund A, B, C, X, Y
Gartmore Government Bond Fund A, B, C, R, X, Y
Gartmore Money Market Fund Service
Gartmore S&P 500 Index Fund A, B, C, R, Service, Local Fund
Gartmore Small Cap Fund A, B, C, R
Gartmore Large Cap Value Fund A, B, C, R
Gartmore Short Duration Bond Fund A, C, Service, IRA
Gartmore U.S. Growth Leaders Fund A, B, C, R
Gartmore Nationwide Leaders Fund A, B, C, R
Gartmore Value Opportunities Fund A, B, C, R
Gartmore Enhanced Income Fund A, R
(formerly Gartmore Morley Enhanced Income Fund)
Gartmore Small Cap Index Fund A, B, C, R
Gartmore Mid Cap Market Index Fund A, B, C, R
Gartmore International Index Fund A, B, C, R
Gartmore Bond Index Fund A, B, C, R
Gartmore Investor Destinations Aggressive Fund A, B, C, R, Service
Gartmore Investor Destinations Moderately Aggressive Fund A, B, C, R, Service
Gartmore Investor Destinations Moderate Fund A, B, C, R, Service
Gartmore Investor Destinations Moderately Conservative Fund A, B, C, R, Service
Gartmore Investor Destinations Conservative Fund A, B, C, R, Service
Gartmore Global Technology and Communications Fund A, B, C, R
Gartmore Global Health Sciences Fund A, B, C, R
NorthPointe Small Cap Growth Fund A, B, C, R
NorthPointe Small Cap Value Fund A, B, C, R
Gartmore Emerging Markets Fund A, B, C, R
Gartmore International Growth Fund A, B, C, R
Gartmore Worldwide Leaders Fund A, B, C, R
Gartmore Global Financial Services Fund A, B, C, R
Gartmore Global Utilities Fund A, B, C, R
Gartmore Micro Cap Equity Fund A, B, C, R
Gartmore Mid Cap Growth Fund A, B, C, R
Gartmore U.S. Growth Leaders Long-Short Fund A, B, C, R
Gartmore China Opportunities Fund A, B, C, R
Gartmore Global Natural Resources Fund A, B, C, R
Gartmore Optimal Allocations Fund: Growth
(formerly Gartmore Optimal Allocations Fund: Aggressive) A, B, C, R
Gartmore Optimal Allocations Fund: Moderate Growth A, B, C, R
(formerly Gartmore Optimal Allocations Fund: Moderately Aggressive)
Gartmore Optimal A, B, C, R
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Allocations Fund: Moderate
Gartmore Optimal A, B, C, R
Allocations Fund: Specialty
Gartmore Optimal A, B, C, R
Allocations Fund: Defensive
Gartmore Small Cap Leaders Fund A, B, C, R
Gartmore Hedged Core Equity Fund A, B, C, R
Gartmore Small Cap Growth Opportunities Fund A, B, C, R
Gartmore Small Cap Value Fund A, B, C, R
Gartmore Small Cap Core Fund A, B, C, R
Gartmore Market Neutral Fund A, B, C, R
-------------------
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The Plan is adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act").
Section 2. Subject to the limitations on the payment of asset-based sales charges set forth in Section 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. ("NASD"), the Funds shall pay amounts not exceeding on an annual basis a maximum amount of:
(a) 25 basis points (0.25%) of the average daily net assets of the Class A Shares of the Funds; and
(b) 100 basis points (1.00%) of the average daily net assets of the Class B Shares of each of the Funds, 75 basis points (0.75%) of which will be a "distribution fee" (as described below) and 25 basis points (0.25%) of which will be a service fee; and
(c) 85 basis points (0.85%) of the average daily net assets of the Class X Shares (formerly Class B shares) of the Gartmore Bond Fund, Gartmore Tax-Free Income Fund, and Gartmore Government Bond Fund, 75 basis points (0.75%) of which will be a distribution fee and 10 basis points (0.10%) of which will be considered a service fee; and
(d) 100 basis points (1.00%) of the average daily net assets of the Class C Shares of each of the Funds which have adopted Class C shares as described above (except the Gartmore Money Market Fund and Gartmore Short Duration Bond Fund), 75 basis points (0.75%) of which will be a "distribution fee" (as described below), and 25 basis points (0.25%) of which will be considered a service fee; and
(e) 85 basis points (0.85%) of the average daily net assets of the Class Y Shares (formerly Class C shares) of the Gartmore Bond Fund, Gartmore Tax-Free Income Fund, and Gartmore Government Bond Fund, 75 basis points (0.75%) of which will be a distribution fee and 10 basis points (0.10%) of which will be considered a service fee; and
(f) 7 basis points (0.07%) of the average daily net assets of the Local Fund Shares of the Gartmore S&P 500 Index Fund; and
(g) 15 basis points (0.15%) of the average daily net assets of the Service Class Shares of the Gartmore S&P 500 Index Fund and the Gartmore Money Market Fund; and
(h) 25 basis points (0.25%) of the average daily net assets of the Service Class Shares of the Gartmore Short Duration Bond Fund, Gartmore Investor Destinations Aggressive Fund Gartmore Investor Destinations Moderately Aggressive Fund, Gartmore Investor Destinations Moderate Fund, Gartmore Investor Destinations Moderately Conservative Fund and Gartmore Investor Destinations Conservative Fund; and
(i) 25 basis points (0.25%) of the average daily net assets of the IRA Class Shares of the Gartmore Short Duration Bond Fund; and
(j) 50 basis points (0.50%) of the average daily net assets of the Class R Shares of the Funds, 25 basis points (0.25%) of which will be a distribution fee and 25 basis points (0.25%) of which will be considered a service fee.
These fees will be paid to Gartmore Distribution Services, Inc. ("GDSI") for activities or expenses primarily intended to result in the sale or servicing of Fund shares. Except as specifically designated above, the fees may be used either as distribution fees or servicing fees to the extent that they fit the descriptions below. As described above, the following types of fees may be paid pursuant to the Plan:
(a) a distribution fee for: (i) (a) efforts of an Underwriter expended in respect of or in furtherance of sales of Class B Shares, and (b) to enable an Underwriter to make payments to other broker/dealers and other eligible institutions (each a "Broker/Dealer") for distribution assistance pursuant to an agreement with the Broker/Dealer; and (ii) reimbursement of expenses (a) incurred by an Underwriter, and (b) incurred by a Broker/Dealer pursuant to an agreement in connection with distribution assistance including, but not limited to, the reimbursement of expenses relating to printing and distributing advertising and sales literature and reports to shareholders for use in connection with the sales of Class B Shares, processing purchase, exchange and redemption requests from customers and placing orders with an Underwriter or the Funds' transfer agent, and personnel and communication equipment used in servicing shareholder accounts and prospective shareholder inquiries; and
(b) a service fee, if applicable and not otherwise covered under an administrative services plan and/or agreement, for: (i) (a) efforts of an Underwriter expended in servicing shareholders and (b) to enable an Underwriter to make payments to a Broker/Dealer for shareholder services pursuant to an agreement with the Broker/Dealer; and (ii) reimbursement of expenses (a) incurred by an Underwriter, and (b) incurred by a Broker/Dealer pursuant to an agreement in connection with shareholder service including, but not limited to personal, continuing services to investors. For purposes of the Plan, a Broker/Dealer may include any of an Underwriter's affiliates or subsidiaries. A service fee will be considered as such pursuant to Section 2830(b)(9) of the Conduct Rules of the NASD.
(c) No provision of this Plan shall be interpreted to prohibit any payments by a Fund with respect to shares of such Fund during periods when the Fund has suspended or otherwise limited sales of such shares.
Section 3. This Plan shall not take effect until it has been approved by a vote of at least a majority (as defined in the 1940 Act) of the outstanding voting securities of the applicable class of each of the Funds, if adopted after any public offering of such shares, and by the vote of the Board of Trustees of the Trust, as described in Section 4 of the Plan.
Section 4. This Plan shall not take effect with respect to a class of a Fund until it has been approved, together with any related agreements, by votes of the majority of both (a) the Board of Trustees of the Trust and (b) those Trustees of the Trust who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of this Plan or any agreements related to this Plan (the "Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements.
Section 5. Unless sooner terminated pursuant to Section 7 or 8, this
Plan shall continue in effect with respect to the class of a Fund for a period
of one year from the date it takes effect with respect to such class and
thereafter shall continue in effect so long as such continuance is specifically
approved at least annually in the manner provided for approval of this Plan in
Section 4.
Section 6. Any person authorized to direct the disposition of monies paid or payable by a Fund pursuant to this Plan or any related agreement shall provide to the Board and the Board shall review at least quarterly a written report of the amounts so expended and the purposes for which such expenditures were made.
Section 7. This Plan may be terminated as to a class of a Fund at any time by vote of a majority of the Rule 12b-1 Trustees, or by vote of a majority of the outstanding affected class of such Fund.
Section 8. Any agreement with any person relating to the implementation of this Plan shall be in writing, and shall provide:
A. That such agreement may be terminated at any time with respect to a Class, without payment of any penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of the outstanding Class Shares of the Fund on not more than 60 days written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its assignment.
Section 9. This Plan may not be amended to increase materially the amount of distribution expenses of a Fund provided for in Section 2 hereof, unless such amendment is approved in the manner provided in Section 3 hereof. No material amendment to this Plan shall be made unless approved in the manner provided for approval of this Plan in Section 4 hereof.
Section 10. The provisions of the Plan are severable for each class of shares of the Funds and any action required hereunder must be taken separately for each class covered hereby.
EX-99(n)
GARTMORE MUTUAL FUNDS
RULE 18f-3 PLAN
Amended, January 11, 2007
to be effective February 28, 2007
WHEREAS, Gartmore Mutual Funds, a Delaware statutory trust (the "Trust"), is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the following have been designated as the series and classes of the Trust:
Series Classes
Gartmore Mid Cap Growth Leaders Fund A, B, C, D, R, Institutional, Institutional Service
Gartmore Growth Fund A, B, C, D, R, Institutional, Institutional Service
Gartmore Nationwide Fund A, B, C, D, R, Institutional, Institutional Service
(formerly Gartmore Total Return Fund)
Gartmore Bond Fund (formerly Nationwide Bond Fund) A, B, C, D, R, X, Y, Institutional
Gartmore Tax-Free Income Fund (formerly A, B, C, D, X, Y, Institutional
Nationwide Tax-Free Income Fund)
Gartmore Government Bond Fund A, B, C, D, R, X, Y, Institutional
(formerly Nationwide Government Bond Fund)
Gartmore Money Market Fund Prime, Service, Institutional
(formerly Nationwide Money Market Fund)
Gartmore S&P 500 Index Fund A, B, C, R, Service, Institutional Service
(formerly Nationwide S&P 500 Index Fund) Local Fund, Institutional
Gartmore Small Cap Fund A, B, C, R, Institutional, Institutional Service
(formerly Nationwide Small Cap Fund)
Gartmore Large Cap Value Fund A, B, C, R, Institutional, Institutional Service
(formerly Nationwide Large Cap Value Fund)
Gartmore Short Duration Bond Fund A, Service, C, IRA, Institutional
(formerly Nationwide Morley Capital Accumulation
Fund and Gartmore Morley Capital Accumulation Fund)
Gartmore U.S Growth Leaders Fund A, B, C, R, Institutional, Institutional Service
(formerly Gartmore Growth 20 Fund)
Gartmore Nationwide Leaders Fund A, B, C, R, Institutional, Institutional Service
(formerly Gartmore U.S. Leaders Fund)
Gartmore Value Opportunities Fund A, B, C, R, Institutional, Institutional Service
Gartmore Enhanced Income Fund A, R, Institutional, Institutional Service
(formerly Gartmore Morley Enhanced
Income Fund)
Gartmore Small Cap Index Fund A, B, C, R, Institutional
(formerly Nationwide Small Cap Index Fund)
Gartmore Mid Cap Market Index Fund A, B, C, R, Institutional
(formerly Nationwide Mid Cap Market Index Fund)
Gartmore International Index Fund A, B, C, R, Institutional
(formerly Nationwide International Index Fund)
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Gartmore Bond Index Fund A, B, C, R, Institutional
(formerly Nationwide Bond Index Fund)
Gartmore Investor Destinations Aggressive Fund A, B, C, R, Institutional, Service
(formerly Nationwide Investor Destinations Aggressive Fund)
Gartmore Investor Destinations Moderately Aggressive Fund A, B, C, R, Institutional, Service
(formerly Nationwide Investor Destinations Moderately
Aggressive Fund)
Gartmore Investor Destinations Moderate Fund A, B, C, R, Institutional, Service
(formerly Nationwide Investor Destinations Moderate Fund)
Gartmore Investor Destinations Moderately Conservative Fund A, B, C, R, Institutional, Service
(formerly Nationwide Investor Destinations Moderately
Conservative Fund)
Gartmore Investor Destinations Conservative Fund A, B, C, R, Institutional, Service
(formerly Nationwide Investor Destinations Conservative
Fund)
Gartmore Global Technology and Communications Fund A, B, C, R, Institutional,
Institutional Service
Gartmore Global Health Sciences Fund A, B, C, R, Institutional, Institutional Service,
NorthPointe Small Cap Growth Fund A, B, C, R, Institutional, Institutional Service
NorthPointe Small Cap Value Fund A, B, C, R, Institutional, Institutional Service
Gartmore Emerging Markets Fund A, B, C, R, Institutional, Institutional Service
Gartmore International Growth Fund A, B, C, R, Institutional, Institutional Service
Gartmore Worldwide Leaders Fund A, B, C, R, Institutional, Institutional Service
(formerly Gartmore Global Leaders Fund)
Gartmore Global Financial Services Fund A, B, C, R, Institutional, Institutional Service
Gartmore Global Utilities Fund A, B, C, R, Institutional, Institutional Service
Gartmore Micro Cap Equity Fund A, B, C, R, Institutional, Institutional Service
Gartmore Mid Cap Growth Fund A, B, C, R, Institutional, Institutional Service
Gartmore U.S. Growth Leaders Long-Short Fund A, B, C, R, Institutional, Institutional Service
(formerly Gartmore Long-Short Equity
Plus Fund)
Gartmore China Opportunities Fund A, B, C, R, Institutional, Institutional Service
Gartmore Global Natural Resources Fund A, B, C, R, Institutional, Institutional Service
Gartmore Optimal A, B, C, R, Institutional, Institutional Service
Allocations Fund: Growth
(formerly Gartmore Optimal Allocations Fund: Aggressive)
Gartmore Optimal A, B, C, R, Institutional, Institutional Service
Allocations Fund:
Moderate Growth (formerly Gartmore
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Optimal Allocations Fund: Moderately Aggressive)
Gartmore Optimal A, B, C, R, Institutional, Institutional Service
Allocations Fund: Moderate (formerly
Gartmore Actively Managed Moderate
Asset Allocation Fund)
Gartmore Optimal A, B, C, R, Institutional, Institutional Service
Allocations Fund: Specialty (formerly
Gartmore Actively Managed Specialty
Asset Allocation Fund)
Gartmore Optimal A, B, C, R, Institutional, Institutional Service
Allocations Fund: Defensive
Gartmore Small Cap Leaders Fund A, B, C, R, Institutional, Institutional Service
Gartmore Hedged Core Equity Fund A, B, C, R, Institutional, Institutional Service
Service Gartmore Small Cap Growth Opportunities Fund A, B, C, R, Institutional,
Gartmore Small Cap Value Fund A, B, C, R, Institutional, Institutional Service
Gartmore Small Cap Core Fund A, B, C, R, Institutional, Institutional Service
Gartmore Market Neutral Fund A, B, C, R, Institutional, Institutional Service
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WHEREAS, Gartmore Mutual Fund Capital Trust ("GMF") serves as investment adviser for each of the series (including Gartmore Emerging Markets Fund, Gartmore International Growth Fund, Gartmore Worldwide Leaders Fund, Gartmore Global Financial Services Fund and Gartmore Global Utilities Fund, effective upon the sale of Gartmore UK) except for the Gartmore Short Duration Bond Fund and Gartmore Enhanced Income Fund;
WHEREAS, Gartmore Morley Capital Management, Inc. serves as investment adviser for the Gartmore Short Duration Bond Fund and the Gartmore Enhanced Income Fund;
WHEREAS, Gartmore Distribution Services, Inc. ("GDSI") serves as underwriter, and Gartmore SA Capital Trust serves as fund administrator for the series of the Trust;
WHEREAS, the Trust has adopted a Distribution Plan ("12b-1 Plan") under Rule 12b-1 of the 1940 Act providing for:
(1) in the case of Class A shares of the Funds, fees of not more than 0.25% per annum of average net assets;
(2) in the case of Class B shares of the Funds, fees of not more than 1.00% per annum of average net assets, of which 0.25% per annum of average net assets is considered a service fee;
(3) in the case of Class C shares of the Funds, fees of not more than 1.00% per annum of average net assets of which 0.25% per annum is considered a service fee (for the Gartmore Money Market Fund, fees of not more than 0.85%, of which 0.10% is considered a service fee);
(4) in the case of the Service Class shares of the Gartmore Short Duration Bond Fund, Gartmore Investor Destinations Aggressive Fund, Gartmore Investor Destinations Moderately Aggressive Fund, Gartmore Investor Destinations Moderate Fund, Gartmore Investor Destinations Moderately Conservative Fund, Gartmore Investor Destinations Conservative Fund, fees of not more than 0.25% per annum of average net assets;
(5) in the case of the Service Class shares of the Gartmore S&P 500 Index Fund and the Gartmore Money Market Fund, fees of not more than 0.15% per annum of average net assets;
(6) in the case of the IRA Class ("IRA Shares") of the Gartmore Short Duration Bond Fund, fees of not more than 0.25% per annum of average net assets;
(7) in the case of Local Fund Shares of the Gartmore S&P 500 Index Fund, fees of not more than 0.07% per annum of average net assets;
(8) in the case of Class X shares (formerly Class B shares) of the Gartmore Bond, Gartmore Government Bond and Gartmore Tax-Free Income Funds (the "Fixed Income Funds"), fees of not more than 0.85% per annum of average net assets, of which 0.10% is considered a service fee;
(9) in the case of Class Y shares (formerly Class C shares) of the Fixed Income Funds, fees of not more than 0.85% per annum of average net assets, of which 0.10% is considered a service fee; and
(10) in the case of Class R shares of the Funds, fees of not more than 0.50% per annum of average net assets of which 0.25% is considered a service fee.
WHEREAS, the Trust has adopted an Administrative Services Plan providing for:
(1) in the case of Class A, Class D, Class R, Institutional Service Class and Service Class shares of the Funds and IRA Shares of the Gartmore Short Duration Bond Fund, fees of not more than 0.25% per annum of average net assets;
WHEREAS, The Trust has established a Multiple Class Distribution System enabling the Trust, as described in its prospectuses, to offer eligible investors the option of purchasing shares of its series with the following features (not all series offer each option):
(1) with a front-end sales load (which can vary among series and which is subject to certain reductions and waivers among groups of purchasers) and providing for a 12b-1 fee, an administrative services fee and under certain circumstances, a contingent deferred sales charge ("CDSC") may be applicable for purchases sold without a sales charge and for which a finder's fee is paid (the "Class A shares of the Funds");
(2) without a front-end load, but subject to a CDSC (which can vary among series and which may be subject to certain reductions or waivers among groups of purchasers) and providing for a 12b-1 fee (the "Class B shares of the Funds");
(3) without a front-end load* and subject to a CDSC (each of which may be subject to certain reductions and waivers among groups of purchasers), and providing for a 12b-1 fee but not providing for an administrative services fee (the "Class C shares of the Funds");
(4) with a front-end load (which can vary among series and which is subject to certain reductions and waivers among groups of purchasers) and providing for an administrative services fee, but not providing for a 12b-1 fee (the "Class D shares of the Funds");
(5) without a front-end load or CDSC, but providing for an administrative services fee (the "Institutional Service Class shares of the Funds");
(6) without a front-end load or CDSC, but providing for a 12b-1 fee, an administrative services fee (the "Service Class shares of the Funds (except the Gartmore Short Duration Bond Fund)");
(7) without a front-end load or CDSC, 12b-1 fee, or administrative service fee (the "Institutional Class shares of the Funds (except the Gartmore Short Duration Bond Fund)");
(8) without a front-end load or a CDSC, but providing for a 12b-1 fee, an administrative services fee, and subject to a redemption fee in certain circumstances (the "Service Class shares and IRA shares of the Gartmore Short Duration Bond Fund");
(9) without a front-end load or a CDSC, but subject to a redemption fee in certain circumstances (the "Institutional Class shares of the Gartmore Short Duration Bond Fund");
(10) with a front-end sales load (which is subject to certain reductions and waivers among groups of purchasers) and providing for a 12b-1 fee, an administrative services fee and under certain circumstances, a contingent deferred sales charge ("CDSC") may be applicable for purchases sold without a sales charge and for which a finder's fee is paid, and subject to a redemption fee in certain circumstances (the "Class A shares of the Gartmore Short Duration Bond Fund");
(11) without a front-end load or CDSC or 12b-1 fee, but with an administrative service fee (the "Prime Shares of the Money Market Fund");
(12) without a front-end load or a CDSC, but providing for a 12b-1 fee (the "Local Fund shares of the Gartmore S&P 500 Index Fund");
(13) without a front-end load, but subject to a CDSC (which can vary among series and which may be subject to certain waivers among groups of purchasers) and providing for a lower 12b-1 fee than the Class B shares of a Fixed Income Fund (the "Class X shares of the Fixed Income Funds");
(14) without a front-end load* and subject to a CDSC (each of which may be subject to certain reductions and waivers among groups of purchasers) and providing for a lower 12b-1 fee than the Class C shares of a Fixed Income Fund (the "Class Y shares of the Fixed Income Funds"); and
(15) without a front-end load or CDSC, but providing for a 12b-1 fee or administrative services fee (the "Class R shares of the Funds").
* Change to remove front-end load is effective April 1, 2004.
WHEREAS, redemption fees will be charged by all classes of the Gartmore Mid Cap Growth Leaders Fund (formerly Gartmore Millenium Growth Fund), Gartmore Value Opportunities Fund, Gartmore Worldwide Leaders Fund, Gartmore U.S. Growth Leaders, Gartmore Emerging Markets Fund, Gartmore International Growth Fund, Gartmore Global Health Sciences Fund, Gartmore Global Technology and Communications Fund, Gartmore Small Cap Fund, Gartmore Nationwide Leaders Fund, Gartmore Global Financial Services Fund, Gartmore Global Utilities Fund, Gartmore Micro Cap Equity Fund, Gartmore Mid Cap Growth Fund, Gartmore U.S. Growth Leaders Long-Short Fund, Gartmore Growth Fund, Gartmore Nationwide Fund, Gartmore Large Cap Value Fund, Gartmore Government Bond Fund, Gartmore Bond Fund, Gartmore Tax-Free Income Fund, Gartmore S&P 500 Index Fund, Gartmore Mid Cap Index Fund, Gartmore Small Cap Index Fund, Gartmore International Index Fund, Gartmore Bond Index Fund, Gartmore China Opportunities Fund, Gartmore Global Natural Resources Fund, Gartmore Hedged Core Equity Fund, Gartmore Small Cap Growth Opportunities Fund, Gartmore Small Cap Value Fund, Gartmore Small Cap Core Fund, Gartmore Market Neutral Fund. These fees will be limited to a maximum of 2.00%, or the limit currently required by the Securities and Exchange Commission, and the structure of these fees will be stated in each applicable Fund's prospectus.
WHEREAS, Rule 18f-3 under the 1940 Act permits an open-end management investment company to issue multiple classes of voting stock representing interests in the same portfolio notwithstanding Sections 18(f)(1) and 18(i) under the 1940 Act if, among other things, such investment company adopts a written plan setting forth the separate arrangements and expense allocation of each class and any related conversion features or exchange privileges;
NOW, THEREFORE, the Trust, wishing to be governed by Rule 18f-3 under the 1940 Act, hereby adopts this Rule 18f-3 Plan as follows:
1. Each class of shares of a series will represent interests in the same portfolio of investments of such series of the Trust, and be identical in all respects to each other class of that series, except as set forth below. The only differences among the various classes of shares of the series of the Trust will relate solely to (a) different distribution or service fee payments associated with any Rule 12b-1 Plan for a particular class of shares and any other costs relating to implementing or amending such Plan (including obtaining shareholder approval of such Plan or any amendment thereto), which will be borne solely by shareholders of such class; and (b) different administrative service fees associated with any Administrative Services Plan; (c) different Class Expenses, which will be limited to the following expenses as determined by the Trustees to be attributable to a specific class of shares: (i) transfer agency fees identified as being attributable to a specific class; (ii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses, and proxy statements to current shareholders of a specific class; (iii) Blue Sky notification and/or filing fees incurred by a class of shares; (iv) SEC registration fees incurred by a class; (v) expenses of administrative personnel and services as required to support the shareholders of a specific class; (vi) litigation or other legal expenses and audit or other accounting expenses relating solely to one class; (vii) Trustee fees or expenses incurred as a result of issues relating to one class; (viii) shareholder meeting costs that relate to a specific class; (ix) wrapper fees, premiums and expenses related to wrapper agreements for the Gartmore Short Duration Bond Fund and the Gartmore Enhanced Income Fund; (d) the voting rights related to any 12b-1 Plan affecting a specific class of shares or related to any other matter submitted to shareholders in which the interests of a Class differ from the interests of any other Class; (e) conversion features; (f) exchange privileges; and (g) class names or designations. Any additional incremental expenses not specifically identified above that are subsequently identified and determined to be properly applied to one class of shares of a series of the Trust shall be so applied upon approval by a majority of the Trustees of the Trust, including a majority of the Trustees who are not interested persons of the Trust.
2. Under the Multiple Class Distribution System, certain expenses may be attributable to the Trust, but not to a particular series or class thereof. All such expenses will be allocated among series based upon the relative aggregate net assets of such series. Expenses that are attributable to a particular series, but not to a particular class thereof, and income, realized gains and losses, and unrealized appreciation and depreciation will be allocated to each class based on its net asset value relative to the net asset value of the series if such series does not pay daily dividends and if the series does pay daily dividends on the basis of the settled shares method (as described in Rule 18f-3(c)(iii). Notwithstanding the foregoing, the principal underwriter, the investment adviser or other provider of services to the Trust may waive or reimburse the expenses of a specific class or classes to the extent permitted under Rule 18f-3 under the 1940 Act and pursuant to any applicable ruling, procedure or regulation of the Internal Revenue Service.
A class of shares may be permitted to bear expenses that are directly attributable to such class including: (a) any distribution/service fees associated with any Rule 12b-1 Plan for a particular class and any other costs relating to implementing or amending such Plan (including obtaining shareholder approval of such plan or any amendment thereto); (b) any administrative services fees associated with any administrative services plan for a particular class and any other costs relating to implementing or amending such plan (including obtaining shareholder approval of such plan or any amendment thereto) attributable to such class; and (c) any Class Expenses determined by the Trustees to be attributable to such class.
3. Class B shares and Class X shares (former Class B shares) of the series, other than shares purchased through reinvestment of a dividend or a distribution with respect to the Class B shares or Class X shares, respectively, of the series, shall automatically convert to Class A shares of the same series on the date that is the first business day of the month after which the Class B shares or Class X shares of the series were outstanding for seven years. Such conversion will be on the basis of the relative net asset values of each class. After the conversion, such shares will have all of the characteristics and rights of Class A shares of the same series. Shares purchased through the reinvestment of a dividend or a distribution with respect to the Class B shares or Class X shares of the series will be converted to Class A shares of the same series in the same proportion as the number of the shareholder's Class B or Class X shares of the series converting to Class A shares of the same series bears to the shareholder's total Class B shares or Class X shares of the series not acquired through dividends and distributions.
4. To the extent exchanges are permitted, shares of any class of the Trust will be exchangeable with shares of the same class of another series of the Trust, or with money market fund shares of the Trust as described in the applicable prospectus. With respect to Class X and Class Y shares of the Fixed Income Funds, exchanges will be permitted from Class X shares of a Fixed Income Fund into Class B shares of the other series (to the extent otherwise permitted) and from Class Y shares of a Fixed Income Fund into Class C shares of the other series (to the extent otherwise permitted). However, there will be no exchanges from Class B shares of other series into Class X shares of a Fixed Income Fund and no exchange from Class C shares of other series into Class Y shares of a Fixed Income Fund. Exchanges will comply with all applicable provisions of Rule 11a-3 under the 1940 Act.
5. Dividends paid by a series of the Trust as to each class of its shares, to the extent any dividends are paid, will be calculated in the same manner, at the same time, on the same day, and will be in the same amount, except that any distribution/service fees, administrative services fees, and Class Expenses allocated to a class will be borne exclusively by that class.
6. Any distribution arrangement of the Trust, including distribution fees and front-end and deferred sales loads, will comply with Section 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc.
7. The initial adoption of, and all material amendments, to this 18f-3 Plan must be approved by a majority of the members of the Trust's Trustees, including a majority of the Board members who are not interested persons of the Trust.
8. Prior to the initial adoption of, and any material amendments to, this 18f-3 Plan, the Trust's Trustees shall request and evaluate, and any agreement relating to a class arrangement shall require the parties thereto to furnish, such information as may be reasonably necessary to evaluate the 18f-3 Plan.
EX-99(q)(1)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as trustees and/or officers of GARTMORE MUTUAL FUNDS (the "Trust"), a Delaware statutory trust, and the Trust, which have filed or will file with the U.S. Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, various Registration Statements and amendments thereto for the registration under said Acts of the Trust, hereby constitutes and appoints James Bernstein, Gerald J. Holland, Eric E. Miller and Allan J. Oster and each of them with power to act without the others, his or her attorney, with full power of substitution and resubstitution, for and in his or her name, place and stead, in any and all capacities, to approve, and sign such Registration Statements and any and all amendments thereto, with power to affix the corporate seal of said Trust thereto and to attest said seal and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, hereby granting unto said attorneys, and each of them, full power and authority to do and perform all and every act and thing requisite to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that which said attorneys, or any of them, may lawfully do or cause to be done by virtue hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned has herewith set his, her or its name and seal as of this 7th day of December, 2006.
/S/ CHARLES E. ALLEN /S/ BARBARA I. JACOBS -------------------------------- ---------------------------- Charles E. Allen, Trustee Barbara I. Jacobs, Trustee /S/ PAULA H.J. CHOLMONDELEY /S/ DOUGLAS F. KRIDLER -------------------------------- ---------------------------- Paula H.J. Cholmondeley, Trustee Douglas F. Kridler, Trustee /S/ C. BRENT DEVORE /S/MICHAEL D. MCCARTHY -------------------------------- ---------------------------- C. Brent DeVore, Trustee Michael D. McCarthy, Trustee /S/ PHYLLIS KAY DRYDEN /S/ ARDEN L. SHISLER -------------------------------- ---------------------------- Phyllis Kay Dryden, Trustee Arden L. Shisler, Trustee /S/ BARBARA L. HENNIGAR /S/ David C. Wetmore -------------------------------- ---------------------------- Barbara L. Hennigar, Trustee David C. Wetmore, Trustee |
EX-99(q)(2)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as officers of GARTMORE MUTUAL FUNDS (the "Trust"), a Delaware statutory trust, and the Trust, which have filed or will file with the U.S. Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, various Registration Statements and amendments thereto for the registration under said Acts of the Trust, hereby constitutes and appoints James Bernstein, Eric E. Miller and Allan J. Oster and each of them with power to act without the others, his or her attorney, with full power of substitution and resubstitution, for and in his or her name, place and stead, in any and all capacities, to approve, and sign such Registration Statements and any and all amendments thereto, with power to affix the corporate seal of said Trust thereto and to attest said seal and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, hereby granting unto said attorneys, and each of them, full power and authority to do and perform all and every act and thing requisite to all intents and purposes as he might or could do in person, hereby ratifying and confirming that which said attorneys, or any of them, may lawfully do or cause to be done by virtue hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned has herewith set his name and seal as of this 12th day of January, 2007.
/s/John H. Grady John H. Grady Gerald J. Holland President and Chief Executive Officer Treasurer |
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as officers of GARTMORE MUTUAL FUNDS (the "Trust"), a Delaware statutory trust, and the Trust, which have filed or will file with the U.S. Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, and/or the Investment Company Act of 1940, as amended, various Registration Statements and amendments thereto for the registration under said Acts of the Trust, hereby constitutes and appoints James Bernstein, Eric E. Miller and Allan J. Oster and each of them with power to act without the others, his or her attorney, with full power of substitution and resubstitution, for and in his or her name, place and stead, in any and all capacities, to approve, and sign such Registration Statements and any and all amendments thereto, with power to affix the corporate seal of said Trust thereto and to attest said seal and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, hereby granting unto said attorneys, and each of them, full power and authority to do and perform all and every act and thing requisite to all intents and purposes as he might or could do in person, hereby ratifying and confirming that which said attorneys, or any of them, may lawfully do or cause to be done by virtue hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned has herewith set his name and seal as of this 12th day of January, 2007.
/s/Gerald J. Holland
John H. Grady Gerald J. Holland
President and Chief Executive Officer Treasurer
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