Prospectus and SAI for Gartmore Optimal Allocations Fund: Defensive

485BPOS 1 gmf485b1206.htm Prospectus and SAI for Gartmore Optimal Allocations Fund: Defensive

'33 Act File No. 333-40455
'40 Act File No. 811-08495

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 2006

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Post-Effective Amendment No. 85 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 86 [X]

(Check appropriate box or boxes)

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)

[ ] immediately upon filing pursuant to paragraph (b)

[X] on December 15, 2006 pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on [date] pursuant to paragraph (a)(1)

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[ ] 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.

Optimal Allocations Series

Gartmore Optimal Allocations Fund: Defensive

Fund Prospectus

December 15, 2006

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved this Fund's 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 and broadly diversified Funds feature an intelligent approach
to asset allocation and provide allocations to both core and specialty asset
classes in an effort to achieve higher risk-adjusted returns.

Table of Contents

SECTION 1: FUND SUMMARY AND PERFORMANCE
Gartmore Optimal Allocations Fund: Defensive

SECTION 2: FUND DETAILS
Additional Information about Investments, Investment
Techniques and Risks

SECTION 3: FUND MANAGEMENT
Investment Adviser
Portfolio Management
Multi-Manager Structure

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

SECTION 5: DISTRIBUTIONS AND TAXES
Distributions and Capital Gains
Selling and Exchanging Shares
Other Tax Jurisdictions
Tax Status for Retirement Plans and Other Tax-Deferred
Accounts
Backup Withholding

SECTION 6: FINANCIAL HIGHLIGHTS

APPENDIX: DESCRIPTION OF UNDERLYING FUNDS

Optimal Allocations Series

Introduction to the Gartmore Optimal Allocations Funds

This Prospectus provides information about the Gartmore Optimal Allocations
Fund: Defensive ("Defensive Fund" or "Fund"), the shares of which are offered by
Gartmore Mutual Funds (the "Trust"). The Defensive Fund is one of five
portfolios of the Gartmore Optimal Allocations Series ("Optimal Funds"), which
are designed to provide broadly diversified investment options that may be
appropriate for a range of investor goals. Each Optimal Fund is a "fund of
funds" that invests primarily in a collection of other mutual funds representing
a variety of asset classes. Only the Defensive Fund is featured in this
Prospectus; the other four Optimal Funds are offered in a separate prospectus.

The Defensive Fund is primarily intended to provide a solution for investors
seeking to:

o achieve their financial objectives through a professionally developed asset
allocation program.
o maximize long-term total returns while targeting specific levels of risk
through broad diversification among several asset classes.

A Note about Share Classes
The Defensive 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 the Defensive Fund represents an investment in the same
assets of the Defensive 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
Defensive Fund are set forth in the Fund Summary.

Although the Defensive Fund is currently managed by Gartmore Mutual Fund Capital
Trust (the "Adviser"), and the Adviser intends to manage the Defensive Fund for
the foreseeable future, the Defensive Fund may employ a "multi-manager"
structure, which means that the Adviser, as the Defensive Fund's investment
adviser, may hire, replace or terminate one or more subadvisers, not affiliated
with the Adviser, for the Defensive Fund without shareholder approval. The
Adviser believes that this structure gives it increased flexibility to manage
the Defensive Fund in your best interest and to operate the Defensive Fund more
efficiently. See Section 3, Fund Management: Multi-Manager Structure for more
information.

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 the next
several months under the terms of an agreement with Gartmore UK.

SECTION 1 GARTMORE OPTIMAL ALLOCATIONS FUND: DEFENSIVE FUND SUMMARY
AND PERFORMANCE

Investment Objective

Each Optimal Fund, including the Defensive Fund, seeks to maximize total
investment return for a given level of risk.

Principal Strategies

The Optimal Funds, including the Defensive Fund, are designed to provide
diversification across major asset classes--U.S. stocks, international stocks,
bonds, short-term investments and specialty assets--by investing in a
professionally selected mix of underlying mutual funds offered by the Gartmore
Mutual Funds as well as unaffiliated mutual funds (each, an "Underlying Fund" or
collectively, "Underlying Funds"). Depending on its target risk level, each
Optimal Fund invests different amounts in these asset classes and underlying
mutual 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 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 real estate investment trusts
("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 may be appropriate for investors who have a lower tolerance
for risk than more aggressive investors and who are seeking sustainable real
returns as a hedge against possible economic deterioration, including inflation,
deflation or rising interest rates.

The Defensive Fund invests in Underlying Funds that are actively managed, many
by the Defensive Fund's Adviser or its affiliates. Certain other Underlying
Funds are managed in a style that attempts to generally replicate the returns of
a particular index. Underlying Funds invest directly in a wide range of
securities in various asset classes. In addition, the Defensive Fund may invest
directly in money market instruments. You could invest in an Underlying Fund
directly; however, the Defensive Fund offers the added benefits of professional
asset allocation and an extra measure of diversification.

The Defensive Fund has an initial target allocation range for each of its chosen
asset classes. The Optimal Funds' portfolio manager establishes an actual
allocation for each Optimal Fund and, on

a quarterly basis, adjusts each allocation as appropriate based on market
movements and other economic factors.

Listed below are the asset classes in which the Defensive Fund may invest, the
Underlying Funds initially anticipated as eligible for allocation within each
asset class, and the target allocation ranges for the Defensive Fund. In the
short term, actual allocations may vary from the target; however, the investment
strategy should approximate the target allocation over longer investment
periods. The Defensive Fund does not necessarily invest in every asset class or
all of the Underlying Funds at any one time, and may invest in Underlying Funds
not specifically identified below. THE ADVISER MAY CHANGE THE SPECIFIED
UNDERLYING FUNDS AND THE ALLOCATIONS TO UNDERLYING FUNDS AT ANY TIME.

ASSET CLASSES AND UNDERLYING FUNDS* TARGET ALLOCATION RANGES

BONDS and SHORT-TERM INVESTMENTS
25% -- 40%
Gartmore Bond Fund
Gartmore Short Duration Bond Fund
Unaffiliated Bond Funds
Affiliated or Unaffiliated Money Market Funds

SPECIALTY ASSETS

(Consists of Underlying Funds that invest in a 60% -- 75%
particular market sector or investment strategy.)

Gartmore Global Financial Services Fund
Gartmore Global Health Sciences Fund
Gartmore Global Natural Resources Fund
Gartmore Global Technology & Communications Fund
Gartmore Global Utilities Fund
Gartmore Market Neutral Fund
Gartmore U.S. Growth Leaders Long-Short Fund
Unaffiliated TIPS Bond Funds
Unaffiliated International Bond Funds
Unaffiliated U.S. and International Real Estate Funds
Unaffiliated Commodity-Linked Funds

* For a summary of information about the Underlying Funds, including their
investment objectives and principal strategies, see the Appendix.

Principal Risks

The Defensive Fund cannot guarantee that it will achieve its investment
objective.

As with any fund, the value of the Defensive Fund's investments--and therefore,
the value of the Defensive Fund's shares--may fluctuate. These changes may occur
because of the following risks:

Risks Applicable to the Defensive Fund

Asset allocation risk - Each Optimal Fund, including the Defensive 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. The Defensive Fund invests a significant proportion of its assets in
Specialty Assets, which may involve riskier types of securities or investment
strategies than those offered by other asset classes. The potential impact of
the risks related to an asset class depends on the size of the Fund's investment
allocation to it.

Performance risk - The Defensive Fund's investment performance is directly tied
to the performance of the Underlying Funds in which it invests. If one or more
of the Underlying Funds fails to meet its investment objective, the Defensive
Fund's performance could be negatively affected. There can be no assurance that
the Defensive Fund or any Underlying Fund will achieve its investment objective.

Risks of 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 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 may 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 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.

The Underlying 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 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 - the risk that 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 Defensive Fund 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 securities 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
o greater risk of loss due to declining credit quality.

Prepayment risk - 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 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 Defensive Fund

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.

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, commodity values or interest rates change in
unexpected ways. Some Underlying Funds may invest in derivatives, including
commodity-linked derivatives and fixed income securities that back such
derivatives, 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 a hedging 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.

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 Defensive Fund does not
intend to engage in market timing in Underlying Fund shares. However, the
Defensive 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 the Defensive 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 the Fund's purchase

and redemption of Underlying Fund shares in a manner to avoid or minimize
subjecting the 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 Defensive Fund shareholders.

If the value of the Defensive Fund's investments goes down, you may lose money.

Performance

Performance information is not provided because the Defensive Fund did not begin
operations until the date of this prospectus.

Fees and Expenses

This table describes the fees and expenses that you may pay when buying and
holding shares of the Defensive Fund depending on the share class you select.
This table also reflects the proportion of the Underlying Funds' expenses you
may pay indirectly through ownership of shares of the Defensive Fund. See
"Indirect Annual Underlying Fund Expenses" below.

--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------
Shareholder Fees (paid directly from your
investment) (1) Class A Class B Class C Class R Institutional Institutional
Shares Shares Shares Shares Service Class Class Shares
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% 0.40%(6) None None
--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------
Other Expenses(7) 0.74% 0.69% 0.69% 0.89% 0.84% 0.69%
--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------
Total Direct Annual Fund Operating
Expenses(8) 1.14% 1.84% 1.84% 1.44% 0.99% 0.84%
--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------
Amount of Fee Waiver/Expense
Reimbursement(9) 0.59% 0.59% 0.59% 0.59% 0.59% 0.59%
--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------
Total Direct Annual Fund Operating Expenses
(After Waivers/Reimbursements) 0.55% 1.25% 1.25% 0.85% 0.40% 0.25%
--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------
Acquired Fund (i.e., Indirect Annual
Underlying Fund) Operating Expenses(10) 0.77% 0.77% 0.77% 0.77% 0.77% 0.77%
--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------
Total Direct and Acquired Fund Annual
Operating Expenses 1.32% 2.02% 2.02% 1.62% 1.17% 1.02%
--------------------------------------------- --------- ---------- ---------- ---------- --------------- ---------------

(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: 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: 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: 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: Choosing a Share
Class--Class C Shares.
(6) Pursuant to the Fund's Rule 12b-1 Plan, Class R shares are subject to a
maximum Rule 12b-1 fee of 0.50% of the average daily net assets of the
Fund's Class R shares, but such fees will be limited to no more than 0.40%
during the current fiscal year. For more information see Section 4,
Investing with Gartmore: Sales Charges and Fees.
(7) "Other Expenses" include administrative services fees which currently are
estimated to be 0.05%, 0.20% and 0.15% for Class A, Class R and
Institutional Service Class shares, respectively, but which are permitted
to be as high as 0.25%. The full 0.25% in administrative services fees is
not reflected in "Other Expenses" at this time because the Fund does not
currently have administrative servicing agreements with financial
intermediaries that charge the full amount permitted.
(8) Expenses are estimated based on the Fund's projected average net assets for
the current fiscal year.
(9) Gartmore Mutual Funds (the "Trust") and Gartmore Mutual Fund Capital Trust
(the "Adviser") have entered into a written contract limiting operating
expenses to 0.25% at least through February 28, 2008 for all share classes.
This limit excludes certain Fund expenses including any taxes, interest,
brokerage fees, extraordinary expenses, Rule 12b-1 fees, short-sale
dividend expenses and administrative services fees and may exclude other
expenses as well. The Trust is authorized to reimburse the Adviser for
management fees previously waived and/or for expenses previously paid by
the Adviser, as long as the reimbursements do not cause the Fund to exceed
the expense limitation in the agreement. Any reimbursements to the Adviser
must be within three years of the end of the fiscal year in which the
Adviser made or waived the payment for which it is being reimbursed. If the
maximum amount of Rule 12b-1 fees and 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 the Fund's expenses.
(10) Because the Defensive Fund invests primarily in mutual funds, the Defensive
Fund is a shareholder of those Underlying Funds. The Underlying Funds do
not charge the Defensive Fund any sales charge for buying or selling
shares. However, the Defensive Fund indirectly pays 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 table above. Although actual indirect expenses vary depending on
how the Defensive Fund's assets are spread among the Underlying Funds, this
figure represents the hypothetical average expense ratio for the Defensive
Fund, based on the Defensive Fund's target allocation and the Underlying
Funds' expense ratios for their most-recent fiscal year (after fee waivers
and reimbursements).

Example

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

The Example assumes that you invest $10,000 in the Defensive 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* $702 $1,087
Class B shares $705 $1,055
Class C shares $305 $755
Class R shares $165 $635
Institutional Service Class shares $119 $497
Institutional Class shares $104 $450

*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 $205 $755
Class C shares $205 $755

** 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 Defensive Fund does not apply sales charges on reinvested dividends and
other distributions. If these sales charges (loads) were included, your costs
would be higher.

SECTION 2 - FUND DETAILS

Additional Information about Investments, Investment Techniques and Risks

Principal Investment Strategies -- The Optimal Funds strive to provide
shareholders with a high level of diversification across major asset classes
primarily through professionally selected investments in the Underlying Funds.

With respect to the Defensive Fund, the portfolio manager first determines the
Fund's actual asset class allocations. The Defensive Fund's portfolio manager
bases this decision on the 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. In making asset allocation decisions, the portfolio
manager will typically confer with Ibbotson Associates Advisors LLC, a
registered investment adviser and wholly-owned subsidiary of Morningstar, Inc.
that provides asset allocation consulting services, prior to making his
decisions. However, the portfolio manager ultimately has sole responsibility for
determining the Defensive Fund's allocation and its investments in Underlying
Funds.

Second, once the asset allocation is determined, the portfolio manager selects
the Underlying Funds. In general, the Defensive Fund may not invest in all
Underlying Funds identified on page __ for a particular asset class, but instead
may select a limited number of Underlying Funds considered most appropriate for
the Defensive Fund's investment objective and target risk level. In selecting
Underlying Funds, the portfolio manager 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 the Defensive Fund depend on
both the asset class allocations and the chosen mix of Underlying Funds. The
portfolio manager periodically reviews asset allocations and continually
monitors the mix of Underlying Funds in order to meet the investment objective,
although there can be no guarantee that the Defensive Fund will meet its
objective.

Temporary investments - The Defensive 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, 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 Defensive
Fund may invest directly; and
o subject to regulatory limits, shares of other investment companies that
invest in securities in which the Defensive Fund may invest.

The use of temporary investments prevents the Defensive Fund from fully pursuing
its investment objective, and the Defensive 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 will post its top 10 portfolio holdings for each of its calendar
quarters on the Trust's internet site at www.nwdfunds.com. The top 10 holdings
will be available no earlier than 10 business days after the end of the Fund's
calendar quarter and will remain available until the Fund files its next
quarterly portfolio holdings report on Form N-CSR or Form N-Q with the U.S.
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.

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 Defensive Fund's investment
adviser. The Adviser manages the investment of the Defensive 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.

The Adviser determines the asset allocation for the Defensive 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 Defensive Fund. For these services, the Defensive Fund pays
the Adviser an annual management fee based on the Fund's average daily net
assets. This is in addition to the indirect fees that the Defensive Fund pays as
a shareholder of the Underlying Funds. The Adviser and the Board of Trustees of
the Trust (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 annual advisory fee that can be paid to the Adviser (as a percentage
of the Fund's average daily net assets) is 0.15% for the Defensive Fund.

A discussion regarding the basis for the Board of Trustees' approval of the
investment advisory agreement for the Defensive Fund will be available in the
Defensive Fund's next semiannual report to shareholders, which will cover the
period from the Defensive Fund's inception through April 30, 2007.

Portfolio Management

William H. Miller, Senior Portfolio Manager, is the portfolio manager of the
Defensive Fund and is responsible for the day-to-day management of the
allocation of the Fund's assets among the asset classes and Underlying Funds. He
is also the portfolio manager of the other Optimal Funds as well as the Gartmore
Investor Destinations Funds and the Gartmore GVIT Investor Destinations Funds,
other asset allocation funds offered by the Adviser. Mr. Miller was the
co-portfolio manager of the Gartmore Nationwide Fund and Gartmore GVIT
Nationwide Fund from September 2000 until April 2006. Mr. Miller joined the
Adviser in July 1999. 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 Fund is managed by the
Adviser, but 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 enabling it
to operate efficiently.

Should the Adviser hire a subadviser, the Adviser would perform the following
oversight and evaluation services to the Fund:

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 recommend a subadviser for the foreseeable
future. In the event that the Adviser does recommend a subadviser that is
approved by the Board of Trustees, the Adviser periodically will provide written
reports to the Board of Trustees regarding its evaluation and monitoring.
Although the Adviser will monitor the subadviser performance, there is no
certainty that any subadviser or the Fund will obtain favorable results at any
given time.

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 below 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 (CDSC)(1) Reduction and waivers of sales charges may be
available.
Annual service and/or 12b-1 fee up to 0.25% Total annual operating expenses are lower than
Administrative services fee up to 0.25% Class B and Class C charges 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 12b-1 fee up to 1.00% Total annual operating expenses are higher than
No administrative services fee Class A charges which means lower 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 12b-1 fee up to 1.00% Total annual operating expenses are higher than
No administrative services fee Class A charges which means 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 otherwise 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.

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
Commission
Sales Charge as a percentage of as
--------------------------------------------- ------------------------------------------------- Percentage
Net Amount Invested of Offering
Amount of Purchase Offering Price (approximately) 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 Fund held in other accounts which may
be eligible for aggregation. Such information may include account statements or
other records regarding shares of the Fund held in (i) all accounts (e.g.,
retirement accounts) with the Fund 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 charges
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 D shares
are offered by other Gartmore Funds, but not the Fund), 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 sell 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 selling 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 sale 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 purchase of Class D, Class B or Class
C 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 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 the 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 the Fund);
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.

The SAI lists other investors eligible for sales charge waivers.

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 Gartmore Mutual Funds (including the Fund in this
prospectus) at one time. Or, you can utilize the Rights of Accumulation 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 to shares acquired through reinvestment of dividends or capital gain
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 sold, whichever is less. If you sell a portion of your shares,
shares that are not subject to a CDSC are sold 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.

Waiver of Contingent Deferred Sales Charges
Class A, Class B, and Class C Shares
The CDSC is waived on:

o the sale of Class A, Class B or Class C shares purchased through reinvested
dividends or distributions. However, a CDSC is charged if you sell your
Class B or Class C shares and then reinvest the proceeds in Class B or
Class C shares within 30 days. The CDSC is re-deposited into your new
account;
o Class B shares which are qualifying redemptions of Class B shares under the
Automatic Withdrawal Program;
o Class B or Class C shares sold following the death or disability of a
shareholder, provided the sale occurs within one year of the shareholder's
death or disability;
o mandatory withdrawals from traditional IRA accounts after age 70-1/2 and
for other required distributions from retirement accounts; and
o sales of Class C shares from retirement plans offered by the Nationwide
Trust Company

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 sell 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:

-------------------- ---------- ------------- ------------ -------------- ---------- ----------- ------------
Sale within 1 year 2 years 3 years 4 years 5 years 6 years 7 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 sell 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 sold, whichever is less.
If you sell a portion of your shares, shares that are not subject to a CDSC are
sold 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 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

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 retail retirement accounts,
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.

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;
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 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 Fund's distributor, Gartmore Distribution
Services, Inc. (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:

------------------------------------------------------- -----------------------------------------------------
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 Fund are also
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 it affiliates 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 the Adviser's (or its affiliates') own legitimate profits
and other of its own resources (not from the Fund) and may be in addition to any
Rule 12b-1 payments that are paid. The Board of Trustees of the Trust will
monitor these revenue sharing arrangements as well as the payment of advisory
fees paid by the Fund to its 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
the Adviser, and not from the Fund's assets, the amount of any revenue sharing
payments is determined by the Adviser.

In addition to the revenue sharing payments described above, the Adviser (and/or
its affiliates) 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 Fund's 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

Fund Transactions--Class A, Class B, and Class C Shares
All transaction orders must be received by the Fund's transfer agent or an
authorized intermediary prior to the calculation of the Fund's NAV (generally 4.
p.m. Eastern time) 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 Uncashed or undeliverable checks may be redeposited after six
wish to purchase.) months in the Fund.
The Fund may reject any order to buy shares * Exchange privileges may be amended or discontinued upon
and may suspend the offering of shares at 60-day written notice to shareholders.
any time. **A medallion signature guarantee may be required. See
"Medallion Signature Guarantee" below.
--------------------------------------------- ---------------------------------------------------------------
Through an authorized intermediary. The Through an authorized intermediary. The Fund's Distributor
Fund's Distributor has relationships with has relationships with certain brokers and other financial
certain brokers and other financial intermediaries who are authorized to accept purchase,
intermediaries who are authorized to accept exchange, and redemption orders for the Fund. Your
purchase, exchange, and redemption orders transaction is processed at the NAV next calculated after the
for the Fund. Your transaction is processed Fund's agent or an authorized intermediary receives your
at the NAV next calculated after the Fund's order in proper form.
agent or an authorized intermediary
receives your order in proper form.
--------------------------------------------- ---------------------------------------------------------------
By mail. Complete an application and send By mail or fax. You may request an exchange or redemption by
with a check made payable to: Gartmore mailing or faxing a letter to Gartmore Funds. The letter must
Funds. Payment must be made in U.S. dollars include your account number(s) and the name(s) of the Fund(s)
and drawn on a U.S. bank. The Fund does not you wish to exchange from and to. The letter must be signed
accept cash starter checks, third-party by all account owners. We reserve the right to request
checks, travelers' checks, credit card original documents for any faxed requests.
checks or money orders.

--------------------------------------------- ---------------------------------------------------------------
By telephone. You will have automatic By telephone. You will have automatic telephone privileges
telephone privileges unless you decline unless you decline this option on your application. The Fund
this option on your application. The Fund follows procedures to confirm that telephone instructions are
follows procedures to confirm that genuine and will not be liable for any loss, injury, damage
telephone instructions are genuine and will or expense that results from executing such instructions. The
not be liable for any loss, injury, damage Fund may revoke telephone privileges at any time, without
or expense that results from executing such notice to shareholders. For redemptions, shareholders who own
instructions. The Fund may revoke telephone shares in an IRA account should call 800-848-0920.
privileges at any time, without notice to
shareholders. Additional information for selling shares. The following
types of accounts can use the voice-response system to sell
shares: Individual, Joint, Transfer on Death, Trust, and
Uniform Gift/Transfer to Minors.

A check made payable to the shareholder(s) of record will be
mailed to the address of record.

The Fund may record telephone instructions to sell shares and
may request sale instructions in writing, signed by all
shareholders on the account.
--------------------------------------------- ---------------------------------------------------------------
On-line. Transactions may be made through On-line. Transactions may be made through the Gartmore Funds'
the Gartmore Funds' website. However, the website. However, the Fund may discontinue on-line
Fund may discontinue on-line transactions transactions of Fund shares at any time.
of Fund shares at any time.
--------------------------------------------- ---------------------------------------------------------------
By bank wire. You may have your bank By bank wire. The Fund can wire the proceeds of your sale
transmit funds by federal funds wire to the directly to your account at a commercial bank. A voided check
Fund's custodian bank. (The authorization must be attached to your application. (The authorization will
will be in effect unless you give the Fund be in effect unless you give the Fund written notice of its
written notice of its termination.) termination.)
o if you choose this method to open o your proceeds will typically be wired to your bank
a new account, you must call our on the next business day after your order has been
toll-free number before you wire your processed.
investment and arrange to fax your o Gartmore Funds deducts a $20 service fee from the
completed application. sale proceeds for this service.
o your bank may charge a fee to wire o your financial institution may also charge a fee for
funds. 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). By Automated Clearing House (ACH). Your redemption proceeds
You can fund your Gartmore Funds account can be sent to your bank via ACH on the second business day
with proceeds from your bank via ACH on the after your order has been processed. A voided check must be
second business day after your purchase attached to your application. Money sent through ACH should
order has been processed. A voided check reach your bank in two business days. There is no fee for
must be attached to your application. Money this service. (The authorization will be in effect unless you
sent through ACH typically reaches Gartmore give the Fund written notice of its termination.)
Funds from your bank in two business days.
There is no fee for this service. (The ACH is not an option for exchanges.
authorization will be in effect unless you
give the Fund written notice of its
termination.)
--------------------------------------------- ---------------------------------------------------------------
Retirement plan participants should contact Retirement plan participants should contact their retirement
their retirement plan administrator plan administrator regarding transactions. Retirement plans
regarding transactions. Retirement plans or or their administrators wishing to conduct transactions
their administrators wishing to conduct should call our toll-free number. Eligible entities or
transactions should call our toll-free individuals wishing to conduct transactions in Institutional
number. Eligible entities or individuals Service Class or Institutional Class shares should call our
wishing to conduct transactions in toll-free number.
Institutional Service Class or
Institutional Class shares should call our
toll-free number.
--------------------------------------------- ---------------------------------------------------------------

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, and
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 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 in
good order, 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 the
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 U.S. 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 shares are purchased and redeemed are fair,
and do not result in dilution of shareholder interests or other harm to
shareholders.

The Defensive Fund's NAV is calculated based upon the net asset values of the
Underlying Funds in which the Defensive Fund invests. 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.

The Fund does not calculate NAV on days when the New York Stock Exchange is
closed.

- New Year's Day
- Martin Luther King, Jr. Day
- Presidents' Day
- Good Friday
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
- Other days when the New York Stock Exchange is closed.

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
To start an Automatic Asset Accumulation Plan $1,000
Additional Investments
(Automatic Asset Accumulation Plan) $50
---------------------------------------------------------------------------
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
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 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 Fund 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 sold 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-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 the Fund to a fund with a higher
sales charge, you may have to pay the difference in the two sales charges;
or
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.

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. However, if
a sales charge was never paid on your Prime Shares, applicable sales charges
apply to exchanges into other fund(s). 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 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 sell your
shares is the net asset value (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 sell 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 sale.

You may not be able to sell 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 sell 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
net asset value 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 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 sales 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.
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.

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.

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, 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 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 the Fund's excessive trading policies or
its exchange limits.

In general:

o an exchange equalling 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 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 sale 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 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.

Exchange and Redemption Fees

In order to discourage excessive trading, the Gartmore Funds impose redemption
and exchange 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 and exchange fees are not imposed on redemptions and
exchanges from the Defensive Fund. However, other Gartmore Funds into which you
may exchange do impose redemption fees as shown below. For further information,
please see the prospectus for the fund into which you may wish to exchange.

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 that other Fund for less than the
minimum holding period listed below:

Fund Exchange/ Minimum Holding
Redemption Fee Period
(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
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 High Yield 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

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 gain 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 net asset value 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, although the Fund's investment techniques may result in more
ordinary taxable income than might otherwise be the case for an equity fund
that does not employ such techniques.
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.
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, 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.

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 sell 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 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.

SECTION 6: FINANCIAL HIGHLIGHTS

Financial information is not provided because the Fund did not begin operations
until the date of this prospectus.

APPENDIX DESCRIPTION OF UNDERLYING FUNDS

Following is a description of the Underlying Funds selected for each asset
class. The mix of Underlying Funds held by the Defensive 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.

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.

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 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 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 lease 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 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 its 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 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.

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 United States, have their principal places of business in the
United States, or whose stock is traded primarily in the United States. 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 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 equity
securities issued by real estate investment trusts and companies engaged in the
real estate industry, either in the U.S. or internationally. 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.

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 the 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. The Fund's first semiannual report will be
available on or about June 30, 2007.

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.

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 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

PR-OPTD

STATEMENT OF ADDITIONAL INFORMATION

December 15, 2006

GARTMORE MUTUAL FUNDS

Gartmore Optimal Allocations Fund: Defensive

Gartmore Mutual Funds (the "Trust") is a registered open-end investment
company consisting of 51 series as of the date hereof. This Statement of
Additional Information ("SAI") relates to the Gartmore Optimal Allocations Fund:
Defensive (the "Defensive Fund" or "Fund") a portfolio of the Gartmore Optimal
Allocations Funds (the "Optimal Funds"), a series of the Trust.

This SAI is not a prospectus but is incorporated by reference into the
prospectus for the Fund, dated December 15, 2006 ("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 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 the next
several months under the terms of an agreement with Gartmore UK.

TABLE OF CONTENTS

General Information and History................................................X
Additional Information on Portfolio Instruments and Investment Policies........X
Description of Portfolio Instruments and Investment Policies...................X
Investment Restrictions........................................................X
Trustees and Officers of the Trust.............................................X
Investment Advisory and Other Services.........................................X
Brokerage Allocation...........................................................X
Additional Information on Purchases and Sales..................................X
Valuation of Shares............................................................X
Systematic Investment Strategies...............................................X
Investor Privileges............................................................X
Investor Services..............................................................X
Fund Performance Advertising...................................................X
Additional Information.........................................................X
Additional General Tax Information.............................................X
Major Shareholders.............................................................X
Financial Statements...........................................................X
Appendix A - Debt Ratings......................................................X
Appendix B - Proxy Voting Guidelines Summaries.................................X

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
Delaware by Declaration of Trust dated February 28, 2005. The Trust, originally
organized as an Ohio business trust under the laws 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 51
separate series, each with its own investment objective.

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES

The Defensive Fund is a "fund of funds," which means that the Defensive
Fund invests primarily in other mutual funds. The Prospectus for the Defensive
Fund discusses the investment objectives and strategies for the Defensive Fund
and explains the types of underlying mutual funds (the "Underlying Funds") in
which the Defensive Fund may invest. Underlying Funds invest in stocks, bonds
and other securities and reflect varying amounts of potential investment risk
and reward. The Defensive Fund allocates its assets among the different
Underlying Funds. Periodically, the Defensive Fund will adjust its asset
allocation within predetermined ranges to ensure broad diversification and to
adjust to changes in market conditions. However, as a general matter, there are
not expected to be large, sudden changes in the Defensive Fund's asset
allocation.

The following is a list of the Underlying Funds in which the Defensive Fund
currently may invest. Certain Underlying Funds are affiliated with the Defensive
Fund, being separate series of the Trust. Other Underlying Funds are not
affiliated with the Defensive Fund or the Trust. This list may be updated from
time to time and may be supplemented with funds not identified here. Each of the
Underlying Funds listed below is described in its respective Prospectus and SAI.

Gartmore Optimal Allocations Fund: Defensive

Gartmore Bond Fund
Gartmore Short Duration Bond Fund
Unaffiliated Bond Funds
Affiliated and Unaffiliated Money Market Funds
Gartmore Global Financial Services Fund
Gartmore Global Health Sciences Fund
Gartmore Global Natural Resources Fund
Gartmore Global Technology & Communications Fund
Gartmore Global Utilities Fund
Gartmore Market Neutral Fund
Gartmore U.S. Growth Leaders Long-Short Fund
Unaffiliated TIPS Bond Funds
Unaffiliated International Bond Funds
Unaffiliated U.S. and International Real Estate Funds
Unaffiliated Commodity-Linked Funds

The Underlying Funds invest in a variety of securities and employ a number
of investment techniques that involve certain risks. The Prospectus for the
Defensive 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 Underlying Funds.
The following table sets forth additional information concerning permissible
investments and techniques for the Underlying Funds. A "Y" in the table
indicates that the Defensive Fund or an Underlying Fund may invest in or follow
the corresponding instrument or technique. An

empty box indicates that the Defensive Fund or any Underlying Fund does not
intend to invest in or follow the corresponding instrument or technique.

-------------------------------------------------- ----
Gartmore
Optional
Allocations
Fund:
Type of Investment or Technique Defensive
-------------------------------------------------- ----
U.S. common stocks Y
-------------------------------------------------- ----
Preferred stocks Y
-------------------------------------------------- ----
Small company stocks Y
-------------------------------------------------- ----
Special situation companies Y
-------------------------------------------------- ----
Illiquid securities Y
-------------------------------------------------- ----
Restricted securities Y
-------------------------------------------------- ----
When-issued / delayed-delivery securities Y
-------------------------------------------------- ----
Investment companies Y
-------------------------------------------------- ----
Real estate investment trusts (REITS) Y
-------------------------------------------------- ----
Securities of foreign issuers Y
-------------------------------------------------- ----
Depositary receipts Y
-------------------------------------------------- ----
Securities from developing countries/emerging Y
markets
-------------------------------------------------- ----
Convertible securities Y
-------------------------------------------------- ----
Long-term debt Y
-------------------------------------------------- ----
Long-term debt when originally issued but with Y
397 days or less remaining to maturity
-------------------------------------------------- ----
Short-term debt Y
-------------------------------------------------- ----
Floating and variable rate securities Y
-------------------------------------------------- ----
Zero coupon securities Y
-------------------------------------------------- ----
Pay-in-kind bonds Y
-------------------------------------------------- ----
Deferred payment securities Y
-------------------------------------------------- ----
Non-investment grade debt Y
-------------------------------------------------- ----
Loan participations and assignments Y
-------------------------------------------------- ----
Sovereign debt (foreign) (denominated in U.S. $) Y
-------------------------------------------------- ----
Foreign commercial paper (denominated in U.S. $) Y
-------------------------------------------------- ----
Duration Y
-------------------------------------------------- ----
U.S. government securities Y
-------------------------------------------------- ----
Money market instruments Y
-------------------------------------------------- ----

--------------------------------------------------- -----
Gartmore
Optional
Allocations
Fund:
Type of Investment or Technique Defensive
--------------------------------------------------- -----
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
--------------------------------------------------- -----
Repurchase agreements Y
--------------------------------------------------- -----
Derivatives Y
--------------------------------------------------- -----
Reverse repurchase agreements Y
--------------------------------------------------- -----
Warrants Y
--------------------------------------------------- -----
Futures Y
--------------------------------------------------- -----
Options Y
--------------------------------------------------- -----
Foreign currencies Y
--------------------------------------------------- -----
Forward currency contracts Y
--------------------------------------------------- -----
Borrowing money Y
--------------------------------------------------- -----
Lending portfolio securities Y
--------------------------------------------------- -----
Investment of securities lending collateral Y
--------------------------------------------------- -----
Short sales Y
--------------------------------------------------- -----
Participation Interests
--------------------------------------------------- -----
Swap Agreements Y
--------------------------------------------------- -----
Credit Default Swaps Y
--------------------------------------------------- -----
Wrap Contracts
--------------------------------------------------- -----
Indexed securities Y
--------------------------------------------------- -----
Strip Bonds Y
--------------------------------------------------- -----
Put Bonds Y
--------------------------------------------------- -----
Private Activity and Industrial Development Bonds
--------------------------------------------------- -----
Custodial Receipts Y
--------------------------------------------------- -----
Nationwide Contract
--------------------------------------------------- -----
Extendable Commercial Notes Y
--------------------------------------------------- -----
Standby Commitment Agreements
--------------------------------------------------- -----
Municipal Securities
--------------------------------------------------- -----

--------------------------------------------------- -----
Equity Linked Notes
--------------------------------------------------- -----
Exchange Traded Funds Y
--------------------------------------------------- -----

DESCRIPTION OF PORTFOLIO INSTRUMENTS AND INVESTMENT POLICIES

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, an Underlying Fund's investment adviser or a
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 the Underlying 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-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 an Underlying Fund as initial criteria for the selection of portfolio
securities, but the Underlying Fund also relies upon the independent advice of
the Underlying 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 an Underlying Fund, an issue of securities
may cease to be rated or its rating may be reduced below the minimum required
for purchase by the Underlying Fund. In addition, it is possible that an NRSRO
might not change its rating of a particular issue to reflect subsequent events.
None of these events generally will require sale of such securities, but the
Underlying Fund's adviser will consider such events in its determination of
whether the Underlying 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
Underlying Fund will attempt to use comparable ratings as standards for its
investments in accordance with its investment objective and policies.

Medium-Quality Securities. Certain of the Underlying 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 IBCA
Information Services, 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, an Underlying 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 an Underlying 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 an Underlying Fund's net asset value. If an Underlying 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), an Underlying Fund may be forced to
liquidate these securities at a substantial discount which would result in a
lower rate of return to the Underlying 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, an Underlying Fund
may have to replace the securities with a lower yielding security, which would
result in a lower return for the Underlying Fund.

Liquidity and Valuation. An Underlying 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 Underlying
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 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, an Underlying
Fund's asset value and ability to dispose of particular securities, when
necessary to meet such Underlying 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 an Underlying Fund to
obtain accurate market quotations for purposes of valuing the Underlying 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 an Underlying Fund purchases the principal portion of
STRIPS, the Underlying 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 dividend, the Underlying Fund
takes into account as income a portion of the difference between the principal
portion of a STRIPS's 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 the GNMA or the 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
experience 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 can 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, an
Underlying 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 an Underlying 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 lower than expected will have the
opposite effect of increasing the yield to maturity. Conversely, if the
Underlying 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 an Underlying 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. An Underlying 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 the Underlying Fund
would likely decrease. Also, the Underlying 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 the Underlying Fund derived from adjustable
rate mortgage securities which remain in a mortgage pool will decrease in
contrast to the income on fixed rate mortgage 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
the 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 the 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 the GNMA
to borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage-backed securities issued by the 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 the FNMA. Mortgage-backed securities issued by the
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 securities 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. Multi-class
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 multi-class pass-through securities.

Typically, CMOs are collateralized by Ginnie Mae, 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
multi-class 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 multi-class
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 semiannual 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.

Certain of the Underlying Funds 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 all of the 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, an Underlying 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, an
Underlying Fund 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. The Underlying Fund 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" in this Statement of Additional Information.

Certain Underlying Funds may also purchase stripped mortgage-backed
securities for hedging purposes to protect 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, an Underlying Fund may fail to recoup fully its initial investment
in these securities even if the securities are rated in the highest rating
category by an 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, an Underlying 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 Underlying
Fund's adviser 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 an
Underlying Fund holding such securities, the Underlying 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. An Underlying Fund's 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'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, an Underlying Fund 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 Underlying Fund may
purchase Brady Bonds with no or limited collateralization, and will rely for
payment of interest and (except in the case of principal collateralized Brady
Bonds) principal primarily on the willingness and ability of the foreign
government to make payment in accordance with the terms of the Brady Bonds.

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 an Underlying 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
were 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 contract, 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.

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 included within the term municipal securities,
only if the interest paid thereon is exempt from federal taxes.

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. 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
Underlying Fund's adviser will consider such an event in determining whether the
Underlying 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 Underlying 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 Underlying 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
Underlying Funds. The Trust is not aware of any binding legislative, judicial or
administrative authority on this issue.

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 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;

-- bank loan participation agreements representing obligations of
corporations having a high quality short-term rating, at the date of investment,
and under which the Underlying 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 an NRSRO or, if not
rated, deemed to be of comparable quality by the Underlying 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;

-- unrated short term (maturing in 397 days or less) debt obligations that
are determined by an Underlying Fund's adviser to be of comparable quality to
the securities described above.

Extendable Commercial Notes

Certain Underlying Funds 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 Underlying Funds will perform due diligence from both a credit and
portfolio structure perspective before investing in ECNs.

Repurchase Agreements

In connection with the purchase of a repurchase agreement from member banks
of the Federal Reserve System or certain non-bank dealers by an Underlying Fund,
the Underlying Fund's custodian, or a subcustodian, will have custody of, and
will segregate securities acquired by the Underlying Fund under a 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 Underlying Fund. Repurchase agreements may be entered
into with respect to securities of the type in which it may invest or government
securities regardless of their remaining maturities, and will require that
additional securities be deposited with it 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 an Underlying 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 Underlying
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. An Underlying Fund's adviser reviews the
creditworthiness of those banks and non-bank dealers with which the Underlying
Fund enters into repurchase agreements to evaluate these risks.

Bank Obligations

Bank obligations that may be purchased by an Underlying 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 an Underlying Fund will

undergo the same credit analysis as domestic issues in which the Underling Fund
invests, and will have at least the same financial strength as the domestic
issuers approved for the Underlying Fund.

When-Issued Securities and Delayed-Delivery Transactions

When securities are purchased by an Underlying 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 an Underlying Fund's outstanding commitments for these
securities, the greater the exposure to potential fluctuations in the net asset
value of the Underlying 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 an Underlying 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 an Underlying 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
Underlying Fund's commitment. It may be expected that an Underlying 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 Underlying Fund will set aside cash or liquid portfolio
securities to satisfy its purchase commitments in the manner described above,
the Underlying Fund's liquidity and the ability of the Underlying 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, an Underlying Fund's commitment to purchase
"when-issued" or "delayed-delivery" securities will not exceed 25% of the value
of its total assets. When an Underlying 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 Underlying Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.

Standby Commitment Agreements

These agreements commit an Underlying Fund, for a stated period of time, to
purchase a stated amount of fixed income securities that may be issued and sold
to the Underlying 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 Underlying Fund is paid a commitment fee, regardless of
whether or not the security is ultimately issued. Underlying 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, an
Underlying Fund may bear the risk of a decline in the value of such security and
may not benefit from an 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 an Underlying 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

The Underlying Funds may lend their portfolio securities to brokers,
dealers and other financial institutions, provided they receive 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, an Underlying Fund can increase its
income through the investment of the collateral. For the purposes of this
policy, the Underlying 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 Underlying Funds to be the equivalent of
cash. From time to time, an Underlying 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 Underlying 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) the Underlying Fund must be able to terminate the loan at any
time; (4) the Underlying 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 Underlying 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 Underlying
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 Underlying 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 an Underlying 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 in 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
an Underlying 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

An Underlying 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 Underlying 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 Underlying 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 an Underlying 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 an Underlying Fund that
invests in special situation companies 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 Underlying Fund's adviser
believes, however, that if it analyzes "special situation companies" carefully
and invests in the securities of these companies at the appropriate time, the
Underlying Fund may achieve capital growth. There can be no assurance however,
that a special situation that exists at the time the Underlying 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 are not typically
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 an Underlying Fund), and since an Underlying Fund may hold
securities and funds in foreign currencies, the Underlying 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 an Underlying 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 an

Underlying Fund has invested in the country. Foreign securities, such as those
purchased by an Underlying 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 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. Certain Underlying 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-United States
banks and trust companies that evidence ownership of either foreign or domestic
securities. For purposes of an Underlying 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.

An Underlying 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, depositories 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 Underlying Funds may invest in sovereign
debt obligations issued by foreign governments. To the extent that an Underlying
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 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 an Underlying Fund may invest will not be subject to
similar restructuring arrangements or to requests for new credit which may
adversely affect the Underlying 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.

Foreign Commercial Paper

Certain Underlying Funds 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. An Underlying 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 an Underlying 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. The
Underlying Funds will purchase such commercial paper for hedging purposes only,
not for speculation. The Underlying Funds believe that such investments do not
involve the creation of such a senior security, but nevertheless will establish
a segregated account with respect to its investments in this type of commercial
paper and to 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 the Underlying Funds will not invest in real estate directly, an
Underlying 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 Underlying 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, 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 an Underlying Fund is called for
redemption, the Underlying 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 Underlying 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 an
Underlying 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
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.

Short Selling of Securities

In a short sale of securities, an Underlying Fund sells stock which it does
not own, making delivery with securities "borrowed" from a broker. The
Underlying 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 Underlying Fund. Until
the security is replaced, the Underlying 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 Underlying 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).

An Underlying 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 Underlying Fund replaces the borrowed security. The Underlying 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 Underlying Fund may be required to pay
in connection with the short sale. When a cash dividend is declared on a
security for which the Underlying Fund has a short position, the Underlying 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
Underlying Fund's unrealized gain or reducing the Underlying Fund's unrealized
loss on its short-sale transaction. Whether an Underlying Fund will be
successful in utilizing a short sale will depend, in part, on the ability of the
Underlying 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. An Underlying 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 Underlying 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.

An Underlying Fund also may engage in short sales, if at the time of the
short sale the Underlying 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." Underlying
Funds generally do not intend to

engage in short sales against the box for investment purposes. An Underlying
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 Underlying Fund (or a security convertible or exchangeable for such
security), or when an Underlying Fund wants to sell the security at an
attractive current price. In such a case, any future losses in the Underlying
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 Underlying
Fund owns. There will be certain additional transaction costs associated with
short sales against the box. For tax purposes, an Underlying 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 Underlying Fund to
realize gain, but not loss.

Restricted, Non-Publicly Traded and Illiquid Securities

Each Underlying 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. Investment companies do not typically 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
investment company 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. An investment company 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 Underlying Funds' limitations on investments in illiquid
securities unless, pursuant to procedures adopted by the Board of Trustees of
the Trust, the Underlying 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, an Underlying Fund's
level of illiquidity may increase.

The Underlying Funds may sell over-the-counter ("OTC") options and, in
connection therewith, segregate assets or cover their obligations with respect
to OTC options written by the Underlying Funds. 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 an Underlying 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 subadviser or adviser will monitor the liquidity of
restricted securities in the portion of the Underlying 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).

Borrowing

The Underlying Funds may borrow money from banks, limited by each
Underlying Fund's fundamental investment restriction (generally, 33-1/3% of its
total assets (including the amount borrowed)), including borrowings for
temporary or emergency purposes. Certain Underlying 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.

Certain types of borrowings by an Underlying Fund may result in the
Underlying 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 Underlying Fund's
adviser from managing the Underlying Fund's portfolio in accordance with its
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 the Underlying Fund to dispose of portfolio investments
at a time when it may be disadvantageous to do so.

Derivative Instruments

The Underlying Funds' adviser(s) may use a variety of derivative
instruments, including options, futures contracts (sometimes referred to as
"futures"), options on futures contracts, commodity-linked derivatives and fixed
income securities that back such instruments, stock index options, forward
contracts, swaps and structured contracts, to hedge an Underlying 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 that Fund's
investment objective. Derivative instruments are securities or agreements whose
value is based on the value of some underlying asset (e.g., a security,
commodity, 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 an Underlying
Fund's 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 an Underlying 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 an Underlying Fund entered
into a short hedge because the Underlying Fund's adviser projected a decline in
the price of a security in the Underlying 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 Underlying Fund could suffer a loss.

(4) As described below, an Underlying 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 an Underlying 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 Underlying 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 Underlying Fund sell
a portfolio security at a disadvantageous time. An Underlying 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 Underlying Fund.

For a discussion of the federal income tax treatment of an Underlying
Fund's derivative instruments, see "Additional General Tax Information" below.

Options. Certain Underlying Funds 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 an Underlying 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 an
Underlying 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 an Underlying 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 an Underlying 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 an Underlying 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.

An Underlying Fund effectively may terminate its right or obligation under
an option by entering into a closing transaction. For example, an Underlying
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 an Underlying
Fund to realize the profit or limit the loss on an option position prior to its
exercise or expiration.

An Underlying 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 an Underlying Fund and the
counterparty (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when an Underlying 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 an Underlying Fund as well as
the loss of any expected benefit of the transaction.

An Underlying Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The
Underlying 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 an Underlying Fund will enter into OTC options only with
counterparties that are expected to be capable of entering into closing
transactions with the Underlying Fund, there is no assurance that the Underlying
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 counter party, an Underlying
Fund might be unable to close out an OTC option position at any time prior to
its expiration.

If an Underlying 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 an Underlying Fund could cause material losses because
the Underlying Fund would be unable to sell the investment used as a cover for
the written option until the option expires or is exercised.

An Underlying 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 an
Underlying Fund to counter party risk. To the extent required by SEC guidelines,
the Underlying Funds 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. The Underlying 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 an Underlying Fund's assets to segregated accounts as a cover could
impede portfolio management or the Underlying Fund's ability to meet redemption
requests or other current obligations.

Spread Transactions. Certain Underlying 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 an
Underlying 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
Underlying Fund does not own, but which is used as a benchmark. The risk to an
Underlying 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 Underlying 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 Underlying 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. An Underlying
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. An Underlying 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.
An Underlying Fund will engage in this strategy only when the Underlying Fund's
adviser believes it is more advantageous to the Underlying Fund than is
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 Underlying 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 an
Underlying 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 an Underlying 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 an Underlying Fund's
exposure to market, currency, or interest rate fluctuations, an Underlying 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. Transactions 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, the Underlying Fund
realizes a gain; if it is more, the Underlying Fund realizes a loss. Conversely,
if the offsetting sale price is more than the original purchase price, the
Underlying Fund realizes a gain; if it is less, the Underlying Fund realizes a
loss. The transaction costs

must also be included in these calculations. There can be no assurance, however,
that an Underlying Fund will be able to enter into an offsetting transaction
with respect to a particular futures contract at a particular time. If the
Underlying Fund is not able to enter into an offsetting transaction, the
Underlying Fund will continue to be required to maintain the margin deposits on
the futures contract.

No price is paid by an Underlying Fund upon entering into a futures
contract. Instead, at the inception of a futures contract, the Underlying 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 the Underlying Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Underlying 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 an Underlying Fund's obligations to or from a
futures broker. When an Underlying Fund purchases an option on a future, the
premium paid plus transaction costs is all that is at risk. In contrast, when an
Underlying 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 Underlying 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 Underlying 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 an Underlying 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, an Underlying 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. Certain Underlying Funds may enter into interest rate,
securities index, commodity, or security and currency exchange rate swap
agreements for any lawful purpose consistent with an Underlying 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 Underlying
Fund than if the it had invested directly in an instrument that yielded that
desired return or spread. An Underlying 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 Underlying 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 an Underlying Fund, the
obligations of the parties would be exchanged on a "net basis." Consequently, an
Underlying 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"). An Underlying Fund's obligation under a swap agreement will be
accrued daily (offset against amounts owed to the Underlying 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 an Underlying Fund's use of swap agreements will be successful in
furthering its investment objective will depend, in part, on the Underlying
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, an Underlying 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 Underlying Funds will enter swap agreements only with counterparties
that an Underlying 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, an Underlying 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. An
Underlying 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 Underlying Fund's securities are
denominated. An Underlying 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 Underlying
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.

An Underlying 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, an Underlying 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, an Underlying 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,
an Underlying 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, an Underlying Fund will normally purchase OTC options on
foreign currency only when the Underlying 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 currency contract, an Underlying
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 Underlying Fund
retains the portfolio security and engages in an offsetting transaction, the
Underlying 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, an Underlying 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 an Underlying Fund's investments. A currency hedge, for example, should
protect a Yen-denominated bond against a decline in the Yen, but will not
protect an Underlying Fund against price decline if the issuer's
creditworthiness deteriorates. Because the value of an Underlying 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 Underlying Fund's
investments denominated in that currency over time.

A decline in the dollar value of a foreign currency in which an Underlying
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, an Underlying Fund may purchase put options on the foreign
currency. If the value of the currency does decline, the Underlying 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 are denominated is projected,
thereby potentially increasing the cost of the securities, the Underlying 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 increases.

An Underlying 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 an Underlying 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. An Underlying 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

As stated above, the Defensive Fund is a fund of funds and primarily
invests its assets in other mutual funds. The Defensive Fund will bear
indirectly its proportionate share of any management fees paid by an investment
company in which it invests in addition to the advisory fee paid by an
Underlying Fund. Some of the countries in which an Underlying 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. An Underlying Fund may include an
exchange-traded fund ("ETF"), while other Underlying Funds may, to the extent
consistent with applicable law, invest in Standard & Poor's Depositary Receipts
("SPDRs") and in shares of 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.

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 invested fully in such securities. Because of this, an ETF's
price can be volatile, and an Underlying Fund may sustain sudden, and sometimes
substantial, fluctuations in its value or in the value of any investment in an
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 an Underlying 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 an Underlying 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, an
Underlying Fund nonetheless will 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. An Underlying Fund will limit its
purchases of floating- and variable-rate obligations to those of the same
quality as it is otherwise allowed to purchase. An Underlying 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.

An Underlying Fund's right to obtain payment at par on a demand instrument
could be affected by events occurring between the date the Underlying 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 Underlying Fund's custodian
subject to a subcustodian agreement approved by the Underlying Fund between that
bank and the Underlying 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
generally are not traded on a national securities exchange, they are traded
widely 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 an Underlying Fund having a
contractual relationship only with the lender, not with the borrower. An
Underlying 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, an Underlying 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 Underlying Fund may not benefit directly from any
collateral supporting the loan in which it has purchased the Participation. As a
result, the Underlying 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 Underlying 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. An Underlying Fund will acquire Loan Participations
only if the lender interpositioned between the Underlying Fund and the borrower
is determined by the applicable adviser to be creditworthy. When an Underlying
Fund purchases Assignments from lenders, the Underlying 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.

An Underlying Fund may have difficulty disposing of Assignments and Loan
Participations. Because the market for such instruments is not highly liquid, an
Underlying 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 an Underlying 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 an Underlying Fund
for which a secondary trading market exists, the Underlying Fund will rely upon
prices or quotations provided by banks, dealers or pricing services. To the
extent a secondary trading market does not exist, an Underlying 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.

Mortgage Dollar Rolls and Reverse Repurchase Agreements

An Underlying 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, an Underlying Fund would sell a security and enter into an agreement
to repurchase the security at a specified future date and price. An Underlying
Fund generally retains the right to interest and principal payments on the
security. Since the Underlying 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, an Underlying Fund will set aside permissible
liquid assets in a segregated account to secure its obligations to repurchase
the security. At the time an Underlying Fund enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an approved
custodian containing liquid securities having a value not less than the
repurchase price (including accrued interest). The assets contained in the
segregated account will be marked-to-market daily and additional assets will be
placed in such account on any day in which the assets fall below the repurchase
price (plus accrued interest). An Underlying 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 an Underlying 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 Underlying Fund's obligation to repurchase the securities, and the
Underlying 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 an Underlying 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 the Underlying Fund would forego principal and
interest paid on the mortgage-backed securities during the roll period, the
Underlying 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. The Underlying Fund also could be
compensated through the receipt of fee income equivalent to a lower forward
price. At the time an Underlying 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 an Underlying
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
Underlying Fund's interest rate sensitivity could increase. Mortgage dollar roll
transactions may be considered a borrowing by the Underlying 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, an Underlying
Fund's adviser believes that such arbitrage transactions do not present the
risks to the Underlying Fund that are associated with other types of leverage.

Temporary Investments

Generally the Fund and the Underlying Funds will be fully invested in
accordance with their investment objectives and strategies. However, pending
investment of cash balances or for other cash management purposes, or if the
Fund's or an Underlying Fund's adviser believes that business, economic,
political or financial conditions warrant, the Fund or the Underlying Fund may
invest without limit in cash or money market cash equivalents, including: (1)
short-term U.S. government securities; (2) certificates of deposit, banker's
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 or an Underlying 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 or an Underlying Fund may invest. Should
this occur, the Fund or an Underlying Fund will not be pursuing its investment
objective and may miss potential market upswings.

Portfolio Turnover

The portfolio turnover rate for an Underlying 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.

INVESTMENT RESTRICTIONS

The following are fundamental investment restrictions of 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 securities means the vote of (A) 67% or more of the voting
securities present at such 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 securities, whichever is less.

The Fund:

o May not borrow money or issue senior securities, except that the 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 SAI of the Fund.

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 (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. 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.

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).

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 sell securities short 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.

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% of the value of its net assets would be invested in securities
that are illiquid.

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 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 such securities to come within such limit as soon
as reasonably practicable. In such 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.

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 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 Fund's 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 10 business days old. Nevertheless,
the Chief Investment Officer, the Chief Administrative Officer or their duly
authorized delegate may authorize, where circumstances dictate, the release of
more current portfolio holdings information. The Fund and each of the Underlying
Funds currently posts its top ten portfolio holdings on the Trust's public
Internet site at www.nwdfunds.com. The top ten portfolio holdings are updated
quarterly and are available ten business days after the end of each quarter end.
The Fund and each of the Underlying Funds also discloses their complete
portfolio holdings information quarterly to the SEC using Form N-Q within 60
days of the end of the first and third quarter ends of the Fund's and each of
the Underlying Funds' fiscal year and on Form N-CSR on the second and fourth
quarter ends of the Fund's and each of the Underlying Funds' fiscal year. Form
N-Q is not required to be mailed to shareholders, but is made public through the
SEC 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, the 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, 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.

If portfolio holdings information is disclosed to third parties in violation of
any provision of this policy, the information will be immediately filed with the
SEC, or by another method or combination of methods that is reasonably designed
to effect broad, non-exclusionary distribution of the information to the public.

The Fund's investment adviser conducts periodic reviews of compliance with
the policy and the Trust's CCO 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

NUMBER OF
POSITION(S) PORTFOLIOS
HELD WITH IN FUND
THE TRUST AND COMPLEX OTHER
NAME, ADDRESS, LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS HELD
AND YEAR OF BIRTH TIME SERVED(1) DURING PAST FIVE YEARS TRUSTEE BY TRUSTEE (2)

Charles E. Allen Trustee since Mr. Allen is Chairman, Chief 98 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. Trustee since Ms. Cholmondeley is an 98 Director of Dentsply
Cholmondeley July 2000 independent strategy International, Inc.,
consultant. Ultralife Batteries,
c/o NWD Investment Ms. Cholmondeley was Vice Inc., Terex
Management, Inc. President and General Corporation, Minerals
1200 River Road, Manager of Sappi Fine Paper Technology, Inc. and
Suite 1000, North America from April Albany International
Conshohocken, PA 2000 through December 2003. Corp.
19428

1947

C. Brent DeVore (3) Trustee since Dr. DeVore is President of 98 None
1990 Otterbein College.
c/o NWD Investment
Management, Inc.
1200 River Road,
Suite 1000,
Conshohocken, PA
19428

1940

Phyllis Kay Dryden Trustee since Beginning in February 2006 98 None
December 2004 Ms. Dryden is employed by
c/o NWD Investment Mitchell Madison Group, a

Management, Inc. management consulting
1200 River Road, company. Ms. Dryden was a
Suite 1000, former Managing Partner of
Conshohocken, PA marchFIRST, a global
19428 management consulting firm
prior to February 2002.
1947

Barbara L. Hennigar Trustee since Retired. 98 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 has served as 98 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, since
Suite 1000, December 2000. Prior to
Conshohocken, PA 2004, Ms. Jacobs was also a
19428 Managing Director and
European Portfolio Manager
1950 with Teachers Insurance and
Annuity Association--
College Retirement Equities
Fund.

Douglas F. Kridler Trustee since Mr. Kridler has served as 98 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 over 1,300 individual
19428 endowment funds) since
February 2002. Prior to
1955 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 98 None
December 2004 Chairman of VMAC (commodity
c/o NWD Investment swaps) from October 2002
Management, Inc. until June 2005; and a
1200 River Road, partner of Pineville
Suite 1000, Properties LLC (a commercial
Conshohocken, PA real estate development
19428 firm).

1947

David C. Wetmore Trustee since Retired. 98 None
1995 and
c/o NWD Investment Chairman
Management, Inc. since
1200 River Road, February 2005
Suite 1000,
Conshohocken, PA
19428

1948

(1) Length of time served includes time served with the Trust's predecessors.

(2) 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.

(3) 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 NWD Investments Group 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 TRUST

POSITION(S) NUMBER OF
HELD WITH PORTFOLIOS IN
THE TRUST FUND
AND LENGTH COMPLEX OTHER
NAME, ADDRESS, OF TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS HELD
AND YEAR OF BIRTH SERVED(1) DURING PAST FIVE YEARS TRUSTEE BY TRUSTEE (2)

Paul J. Hondros Trustee Mr. Hondros has been President 98(4) None
since July and Chief Executive Officer of
NWD Investment 2000 various NWD Investments Group
Management, Inc. entities, including Gartmore
1200 River Road, Distribution Services, Inc.
Suite 1000, ("GDSI")(3), Gartmore Investor
Conshohocken, PA Services, Inc. ("GISI")(3),
19428 Gartmore Morley Capital
Management, Inc. ("GMCM")(3),
1948 Morley Financial Services,
Inc. ("MFS")(3), NorthPointe
Capital, LLC
("NorthPointe")(3), NWD
Management & Research Trust
("NWD MRT")(3), NWD Investment
Management, Inc.
("NWDIMI")(3), Gartmore Mutual
Fund Capital Trust
("GMFCT")(3) and Gartmore SA
Capital Trust ("GSA")(3); and
a Director of Nationwide
Securities, Inc.(3), as well
as several entities within
Nationwide Financial Services,
Inc.

Arden L. Shisler Trustee Retired; Mr. Shisler is the 98 Director of Nationwide
since former President and Chief Financial Services,
c/o NWD Investment February 2000 Executive Officer of KeB Inc. (1)
Management, Inc. Transport, Inc., a trucking
1200 River Road, firm (2000 through 2002). He
Suite 1000, served as a consultant to KeB
Conshohocken, PA from January 2003 through
19428 December 2004. Since 1992, Mr.
Shisler has also been Chairman
1941 of the Board for Nationwide
Mutual Insurance Company(3).

Gerald J. Holland Treasurer Mr. Holland is Senior Vice N/A None
since March President - Operations for
NWD Investment 2001 NWDIMI(3), GMFCT(3) and
Management, Inc. GSA(3).
1200 River Road,
Suite 1000,
Conshohocken, PA
19428

1951

Michael A. Chief Since November 1999, Mr. N/A None
Krulikowski Compliance Krulikowski has served as a
Officer Vice President and Chief
NWD Investment since June Compliance Officer of NWDIMI(3).
Management, Inc. 2004 Since June 2004, Mr. Krulikowski
1200 River Road, has also served as Chief
Suite 1000, Compliance Officer of the Trust.
Conshohocken, PA
19428

1959

Eric E. Miller Secretary Mr. Miller is Senior Vice N/A None
since President, Chief Counsel for
NWD Investment December 2002 NWDIMI(3), GMFCT(3), and
Management, Inc. GSA(3) since August 2002.
1200 River Road, From August 2000 to August
Suite 1000, 2002, Mr. Miller was a Partner
Conshohocken, PA with Stradley Ronon Stevens &
19428 Young, LLP.

1953

(1) Length of time served includes time served with the Trust's predecessors.
(2) 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.
(3) This position is held with an affiliated person or principal underwriter of
the Trust.
(4) Mr. Hondros is also an Administrative Committee Member for The Alphagen
Arneb Fund, LLC, The Healthcare Fund LDC, The Leaders Long-Short Fund, LLC
and The Leaders Long-Short Fund LDC, four private investment companies
(hedge funds) managed by Gartmore SA Capital Trust.

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 (Chairman), 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) overseeing 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) overseeing 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.

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, 2005

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 EACH FUND INVESTMENT COMPANIES

Charles E. Allen None $10,001-$50,000
Paula H.J. Cholmondeley None $10,001-$50,000
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 None
David C. Wetmore None Over $100,000
Paul J. Hondros 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, 2005

TRUSTEES WHO ARE NOT INTERESTED PERSONS (AS DEFINED IN THE 1940 ACT) OF THE FUNDS

NAME OF OWNERS
AND
RELATIONSHIPS TO NAME OF TITLE OF CLASS OF VALUE OF
NAME OF TRUSTEE 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, NWD Management & Research Trust (formerly, Gartmore
Global Asset Management 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, 2005. In addition, the table sets forth the total
compensation to be paid to the Trustees from all the Gartmore Funds for the
fiscal year ended October 31, 2005. 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 AS ESTIMATED ANNUAL
COMPENSATION FROM PART OF TRUST BENEFITS UPON TOTAL COMPENSATION
NAME OF TRUSTEE THE TRUST EXPENSES RETIREMENT FOR THE COMPLEX(1)

Charles E. Allen $ 49,750 $ 0 $ 0 $ 100,500
Paula H.J. 58,333 0 0 117,667
Cholmondeley
C. Brent DeVore 50,500 0 0 101,000
Phyllis Kay Dryden 35,250 0 0 70,500
Barbara L. Hennigar 51,500 0 0 103,000
Paul J. Hondros(2) NA NA NA NA
Barbara I. Jacobs 36,000 0 0 73,000

Douglas F. Kridler 50,250 0 0 101,250
Michael D. McCarthy 33,500 0 0 67,750
Arden L. Shisler 40,750 0 0 81,875
David Wetmore 66,125 0 0 133,250

(1) On October 31, 2005, the Fund Complex included two trusts comprised of
84 investment company funds or series.

(2) Does not receive compensation from the Trust for meeting attendance or
serving as a Trustee.

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).

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,
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 ("GMF" 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, GMF manages the Fund
in accordance with the policies and procedures established by the Trustees. GMF
manages the day-to day investments of the Fund. GMF pays the compensation of the
officers of the Trust employed by GMF and pays a pro rata portion of the
compensation and expenses of the Trustees who are employed by NWDIMI and its
affiliates. GMF 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, GMF 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 GMF,
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 two
years 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 GMF may render
similar services to others.

GMF, 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, 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.

For services provided under the Investment Advisory Agreement, GMF receives
an annual fee of 0.15% 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, GMF may from time to
time waive some or all of its investment advisory fee or reimburse other fees
for the Fund. In this regard, GMF 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, GMF 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 Fund
to the limits described below. Please note that the waiver of such fees will
cause the total return and yield of the Fund to be higher than they would
otherwise be in the absence of such a waiver.

GMF may request and receive reimbursement from the Fund for the advisory
fees waived or limited and other expenses reimbursed by GMF pursuant to the
Expense Limitation Agreement 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 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 GMF is not
permitted.

Until at least February 28, 2008, GMF has agreed contractually to waive
advisory fees and, if necessary, reimburse expenses in order to limit total
annual fund operating expenses to 0.25% 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, other expenditures which are capitalized in accordance with
generally accepted accounting principles and other extraordinary expenses.

Investment Advisory Fees

The Fund has not commenced operations as of the date of this SAI, and thus
paid no investment advisory fees.

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 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 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") serves as underwriter for the
Fund in the continuous distribution of its shares pursuant to an Underwriting
Agreement dated as of February 28, 2005 (the "Underwriting Agreement"). Unless
otherwise terminated, the Underwriting Agreement will continue from year to year
thereafter for successive annual periods, if, 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. 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 NWD
Investment Management, Inc. ("NWDIMI"), a Delaware holding company. NWDIMI is a
majority owned, indirect subsidiary of NWD MRT.

The following entities or people are affiliates of the Trust and are also
affiliates of GDSI:

Gartmore Mutual Fund Capital Trust
NWD Management & Research Trust
Gartmore SA Capital Trust
Nationwide Life Insurance Company
Nationwide Life and Annuity Insurance Company
Nationwide Financial Services, Inc.
Nationwide Corporation
Nationwide Mutual Insurance Company
Paul Hondros
Gerald Holland
Eric 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.

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 may enter into, from time to time, Rule 12b-1 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 for aid in distribution or for aid in
providing administrative services to 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 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 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 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
ASSET LEVEL AS A PERCENTAGE OF NET 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%

GSA pays GISI from these fees for its services as the Trust's transfer and
dividend disbursing agent.

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
ASSET LEVEL AS A PERCENTAGE OF NET 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

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 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 Fund, the Trust
has entered into a Servicing Agreement for the Fund 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 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.

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 Fund.

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

GMF (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. GMF 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.

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.

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 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 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.

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 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: Christmas Day, New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day and Thanksgiving Day.

The Fund reserves the right to not determine net asset value 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. 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 GMF or designee, are
valued at fair value under procedures approved by the Fund's 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 U.S. 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 pricing service activities and results are reviewed by an officer of
the Trust. Securities and other assets, for which such market prices are
unavailable 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 GMF or
its designee, are valued at fair value under procedures approved by the Trust's
Board of Trustees.

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,
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 gain 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
gain 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
automatically be reinvested in the form of additional shares, and you will
receive a confirmation.

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 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 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, 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 (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
for the Fund (except for the Gartmore Short Duration Bond Fund 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
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 tape 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 of our 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 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 telephone
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 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.

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. 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 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 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, 30-day
yield, and seven-day yield, 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 51 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. The 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 a
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 Internal Revenue Code of 1986, as
amended (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 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. 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.

Credit Default Swap Agreements. The 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 the Fund intends
to account for such transactions in a manner deemed to be appropriate, the IRS
might not accept such treatment. The Fund intends to monitor developments in
this area.

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 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 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 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.

The Nationwide Life Insurance Company and its affiliates directly or
indirectly own the Adviser. Since the Fund has not yet commenced operations, it
is expected that upon commencement of the public offering, the Adviser or one of
its affiliates will own all or substantially all of the Fund's shares. To the
extent Nationwide Life Insurance Company and its affiliates directly or
indirectly own, control and hold power to vote 25% or more of the outstanding
shares of the Fund, they are deemed to have "control" over matters which are
subject to a vote of the Fund's shares.

FINANCIAL STATEMENTS

A copy of the Fund's semi-annual report may be obtained without charge may
be obtained without charge upon request by writing the Fund or by calling toll
free 1-800-848-6311. As the Fund is new, the first semi-annual report will be
available on or about June 30, 2007.

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.

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.

A-1

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.

A-2

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, 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 IBCA INFORMATION SERVICES, INC. BOND RATINGS

Fitch IBCA Information Services, 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.

A-3

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.

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.

A-4

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 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.

A-5

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.

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.

A-6

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 Funds' 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.

B-1

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

B-2

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.

B-3

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

B-4

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.

B-5

APPENDIX C

PORTFOLIO MANAGER

INVESTMENTS IN THE FUND

Name of Dollar Range of
Portfolio Manager Fund Name Investments in the Fund

William H. Miller Gartmore Optimal Allocations None
Fund: Defensive

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

C-1

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 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.

------------------------ -------------------------------------------------------------------
Name of Number of Accounts Managed by Each Portfolio Manager and Total
Portfolio Manager Assets by Category as of June 30, 2006
------------------------ -------------------------------------------------------------------
William H. Miller Mutual Funds: 14 accounts, $8,887,732,683 total assets
Other Pooled Investment
Vehicles: 0 accounts, $0 total assets
Other Accounts: 0 accounts, $0 total assets

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

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 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
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.

C-2

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Amended and Restated Agreement and Declaration of Trust, amended and
restated as of October 28, 2004, of the Trust 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
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
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
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 amended and restated as of October 28, 2004,
of the Trust 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")
(formerly Villanova Mutual Fund Capital Trust) dated February 28,
2005, previously filed with the Trust's registration on February 28,
2006, is hereby incorporated by reference.

(a) Exhibit A to Investment Advisory Agreement amended effective
February 28, 2006, previously filed with the Trust's registration
statement on February 28, 2006, is hereby incorporated by
reference.

(b) Exhibit A to Investment Advisory Agreement amended effective
December 15, 2006, adding the Gartmore Optimal Allocations Fund:
Defensive, is filed herewith as Exhibit 23(d)(1)(b).

(c) 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, 2006, previously filed with the Trust's registration
statement on February 28, 2006, is hereby incorporated by
reference.

(3) Investment Advisory Agreement between the Trust and NWD Management &
Research Trust ("NWD MRT") (formerly Gartmore Global Asset Management
Trust) 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, previously filed with the Trust's registration
statement on February 28, 2006, is hereby incorporated by
reference.

(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.

(4) Subadvisory Agreements.

(a) Subadvisory Agreement pertaining to certain series of the Trust
between GMFCT and NorthPointe Capital, LLC for the Gartmore Large
Cap Value (formerly, the Prestige Large Cap Value Fund), 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.

(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, is filed herewith
as Exhibit 23(d)(4)(b).

(c) Subadvisory Agreement pertaining to certain series of the Trust
amount the Trust, GMFCT and Gartmore Global Partners ("GGP") for
the Gartmore China Opportunities, Gartmore Emerging Markets,
Gartmore International Growth, Gartmore Worldwide Leaders,
Gartmore Financial services and Gartmore Global Utilities Funds,
effective September 29, 2006, is filed herewith as Exhibit
23(d)(4)(c).

(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) Schedule A to Underwriting Agreement, amended effective December
15, 2006, is filed herewith as Exhibit 23(e)(1)(a).

(2) Model Dealer Agreement, previously filed with the Trust's registration
statement on December 28, 2004, is hereby incorporated by reference.

(a) Form of Amendment to Dealer Agreement dated as of February 28,
2005, previously filed with the Trust's registration statement on
February 28, 2005, is hereby incorporated by reference.

(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 Gartmore Mutual Funds, effective as of December 15, 2006, is
filed herewith as Exhibit 23(g)(1)(a).

(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, is filed
herewith as Exhibit 23(g)(4).

(5) Institutional Client Agreement dated September 28, 2006, between
Citigroup Global Markets Inc. and Gartmore Hedged Core Equity and
Gartmore Market Neutral Funds, is filed herewith as Exhibit 23(g)(5).

(h) (1) Fund Administration and Transfer Agency Agreement between the Trust,
Gartmore SA Capital Trust and Gartmore Investor Services, Inc., as
amended and restated 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) Amended Exhibit C to Fund Administration and Transfer Agency
Agreement, amended effective December 15, 2006, is filed herewith
as Exhibit 23(h)(1)(b)(1).

(2) (a) Administrative Services Plan effective February 28, 2005,
previously filed with the Trust's registration statement on July
7, 2006, is hereby incorporated by reference.

(i) Exhibit A to Administrative Services Plan, amended
effective December 15, 2006, is filed herewith as
Exhibit 23(h)(2)(a)(i).

(b) Servicing Agreement to Administrative Services Plan ("Servicing
Agreement") dated May 9, 1998, previously filed with the Trust's
registration statement on January 5, 1999, is hereby incorporated
by reference.

(c) Form of Amendment to Servicing Agreement dated February 28, 2005,
previously filed with the Trust's registration statement on
February 28, 2005, is hereby incorporated by reference.

(3) Expense Limitation Agreement between the Trust and GMFCT relating to
the Gartmore Mid Cap Growth, Gartmore Mid Cap Growth Leaders, Gartmore
Convertible, Gartmore Money Market, Gartmore Small Cap Leaders,
Gartmore China Opportunities, Gartmore Global Natural Resources and
each of the Gartmore Optimal Allocations Funds, effective February 28,
2005, previously filed with the Trust's registration statement on
February 28, 2006, is hereby incorporated by reference.

(a) Exhibit A to Expense Limitation Agreement, adding the 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 and Gartmore Market Neutral Funds effective September
29, 2006, previously filed with the Trust's registration
statement on September 29, 2006, is hereby incorporated by
reference.

(b) Revised Exhibit A to Expense Limitation Agreement, adding the
Gartmore Optimal Allocations Fund: Defensive, effective December
15, 2006, is filed herewith as Exhibit 23(h)(3)(a).

(4) Expense Limitation Agreement between the Trust and Gartmore Morley
Capital Management, Inc. ("GMCM") relating to the Morley Enhanced
Income Fund effective February 28, 2005, previously filed with the
Trust's registration statement on February 28, 2006, is hereby
incorporated by reference.

(a) Exhibit A to Expense Limitation Agreement amended effective
February 28, 2006, previously filed with the Trust's registration
statement on February 28, 2006, is hereby incorporated by
reference.

(5) Expense Limitation Agreement between the Trust and GMCM relating to
the Gartmore Short Duration Bond Fund effective February 28, 2005,
previously filed with the Trust's registration statement on February
28, 2006, is hereby incorporated by reference.

(6) Expense Limitation Agreement between the Trust and GMFCT relating to
the Gartmore Large Cap Value, Gartmore Small Cap, Gartmore Global
Technology and Communications, Gartmore Global Health Sciences,
NorthPointe Small Cap Value, Gartmore Value Opportunities, Gartmore
High Yield Bond, 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 Asset Allocation Funds
effective February 28, 2005, previously filed with the Trust's
registration statement on February 28, 2006, is hereby incorporated by
reference.

(a) Exhibit A to Expense Limitation Agreement amended effective
February 28, 2006, previously filed with the Trust's registration
statement on February 28, 2006, is hereby incorporated by
reference.

(7) Expense Limitation Agreement between the Trust and GMFCT relating to
Gartmore U.S. Growth Leaders Long-Short Fund effective February 28,
2005, previously filed with the Trust's registration statement on
February 28, 2006, is hereby incorporated by reference.

(8) Expense Limitation Agreement between the Trust, GMFCT and NorthPointe
Capital, LLC relating to the NorthPointe Small Cap Growth Fund
effective February 28, 2005, previously filed with the Trust's
registration statement on February 28, 2006, is hereby incorporated by
reference.

(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, Paul J.
Hondros, 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.

(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) (1) Distribution Plan under Rule 12b-1 effective February 28, 2005,
previously filed with the Trust's registration statement on February
28, 2005, is hereby incorporated by reference.

(2) Amended Distribution Plan under Rule 12b-1, effective December 15,
2006, is filed herewith as Exhibit 23(m)(2).

(n) (1) Amended 18f-3 Plan effective February 28, 2005, previously filed with
the Trust's registration statement on February 28, 2005, is hereby
incorporated by reference.

(2) Amended 18f-3 Plan, effective December 15, 2006, is filed herewith as
Exhibit 23(n)(2).

(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) Power of Attorney for Charles E. Allen, Paula H. J. Cholmondeley, C.
Brent DeVore, Robert M. Duncan, Barbara L. Hennigar, Gerald J.
Holland, Paul J. Hondros, Thomas J. Kerr, IV, Douglas F. Kridler,
Arden L. Shisler, and David C. Wetmore dated March 13, 2003,
previously filed with the Trust's registration statement on April 30,
2003, is hereby incorporated by reference.

(2) Power of Attorney for Charles E. Allen, Michael J. Baresich, Paula H.
J. Cholmondeley, C. Brent DeVore, Robert M. Duncan, Barbara L.
Hennigar, Paul J. Hondros, Thomas J. Kerr, IV, Douglas F. Kridler,
Arden L. Shisler, David C. Wetmore and Gerald J. Holland, Treasurer,
previously filed with the Trust's registration statement on December
30, 2004, is hereby incorporated by reference.

(3) Power of Attorney for Phyllis Kay Dryden, Barbara I. Jacobs and
Michael D. McCarthy is filed herewith as Exhibit 23(q)(3).

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)(10) 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. The Directors of NWD Investment Management,
Inc., (formerly Gartmore Global Investments, Inc.) GMFCT's managing
unitholder and the officers of GMFCT are as follows:

Paul J. Hondros, Director, President and Chief Executive Officer
Gartmore Investors Services, Inc.
NorthPointe Capital, LLC
NWD Investment Management, Inc.
Gartmore Distribution Services, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust

Chief Executive Officer and President
Gartmore Mutual Funds

Chief Executive Officer and President
Gartmore Variable Insurance Trust

Jeffrey S. Meyer, Executive Vice President and Chief Executive Officer, Europe
NWD Management & Research Trust
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
Gartmore Distribution Services, Inc.

Glenn W. Soden, Associate Vice President and Secretary
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Investment Management, Inc.
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

Carol L. Dove, Assistant Treasurer
NWD Investment Management, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

Gerald J. Holland, Senior Vice President and Chief Administrative Officer
NWD Investment Management, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
Gartmore Distribution Services, Inc.

Treasurer and Chief Financial Officer
Gartmore Mutual Funds
Gartmore Variable Insurance Trust

Michael A. Krulikowski, Vice President and Chief Compliance Officer
Gartmore Distribution Services, Inc.
NWD Investment Management, Inc.
Gartmore SA Capital Trust
NWD Management & Research Trust
NorthPointe Capital, LLC
Gartmore Mutual Funds
Gartmore Variable Insurance Trust

Daniel J. Murphy, Assistant Treasurer
NWD Management & Research Trust
Gartmore SA Capital Trust
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

Eric E. Miller, Senior Vice President - Chief Legal Counsel
NWD Investment Management, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NorthPointe Capital, LLC
Morley Financial Services, Inc.
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

Secretary
Gartmore Mutual Funds
Gartmore Variable Insurance Trust

Richard Fonash, Vice President
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

Thomas E. Barnes, Vice President
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

J. Morgan Elliott, Assistant Treasurer
NWD Investment Management, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

Alan A. Todryk, Vice President, Taxation
NWD Investment Management, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust
Gartmore Distribution Services, Inc.

Toni L. Lindsey, Assistant Vice President
NWD Investment Management, Inc.
NWD Management & Research Trust

Gerald T. Nichols, Senior Vice President, Co-Head of U.S. Fixed Income
NWD Investment Management, Inc.

Patrick Udovich, Senior Vice President, Human Resources
NWD Investment Management, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust

Except as otherwise noted, the principal business address of any company with
which any person specified above is connected in the capacity of director,
officer, employee, partner or trustee is One Nationwide Plaza, Columbus, Ohio
43215, except for the following companies:

NWD Investment Management, Inc.
Gartmore Mutual Fund Capital Trust
Gartmore SA Capital Trust
NWD Management & Research Trust
Gartmore Distribution Services, Inc.
1200 River Road, Suite 1000
Conshohocken, Pennsylvania 19428

NorthPointe Capital, LLC
Suite 745
201 West Big Beaver Road
Troy, Michigan 48084

Morley Financial Services, Inc.
5665 S. W. Meadows Road, Suite 400
Lake Oswego, Oregon 97035

(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:
Paul J. Hondros 300 Barr Harbor Drive, Suite President and Chief Executive Chairman
300 Officer
Conshohocken, PA 19428
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.
Glenn W. Soden 1200 River Road Associate Vice President and n/a
Conshohocken PA 19428 Assistant Secretary
Carol L. Dove One Nationwide Plaza Vice President and Assistant n/a
Columbus, OH 43215 Treasurer
Daniel J. Murphy One Nationwide Plaza Assistant Treasurer n/a
Columbus, OH 43215
Michael A. Krulikowski 1200 River Road Vice President and Assistant Secretary
Conshohocken PA 19428 Chief Compliance Officer and Chief
Compliance Officer
Thomas E. Barnes One Nationwide Plaza Vice President and n/a
Columbus, OH 43215 Secretary
Alan A. Todryk One Nationwide Plaza Vice President, Taxation n/a
Columbus, OH 43215
Jeffery S. Meyer 1200 River Road Executive Vice President n/a
Conshohocken PA 19428
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
J. Morgan Elliott One Nationwide Plaza Assistant Treasurer n/a
Columbus, OH 43215

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. 85, 86 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 14th day of December, 2006.

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. 85, 86 TO THE REGISTRATION STATEMENT OF GARTMORE MUTUAL FUNDS HAS
BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE
14th DAY OF DECEMBER, 2006.

Signature & Title

Principal Executive Officer

/s/ Paul J. Hondros*
Paul J. Hondros, Trustee, Chief Executive Officer and President

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

EXHIBITS INDEX

EXHIBITS EXHIBIT NO.

Exhibit A to Investment Advisory Agreement EX-23(d)(1)(b)

BlackRock Sub Investment Advisory Agreement EX-23(d)(4)(b)

GGP Sub Investment Advisory Agreement EX-23(d)(4)(c)

Amended Schedule A to Underwriting Agreement EX-23(e)(1)(a)

Fund List to Global Custody Agreement EX-23(g)(1)(a)

Special Custody Account Agreement EX-23(g)(4)

Institutional Client Agreement Ex-23(g)(5)

Amended Exhibit C to Fund Administration
and Transfer Agency Agreement EX-23(h)(1)(b)

Exhibit A to Administrative Services Plan EX-23(h)(2)(a)(i)

Revised Exhibit A to Expense Limitation Agreement EX-23(h)(3)(a)

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)(2)

Power of Attorney EX-23(q)(3)