Financial Advisers

Market commentary or fund strategy at this time is often out of date within a very short period of time. Therefore, this update is a brief factual overview of performance and stock contributors over the month of May. We are all too aware that accurate and timely communication is vital to both you and your clients, so for the most up-to-date information please contact your usual Gartmore representative.

To view individual fund commentaries please click on one of the below links:

Gartmore Cautious Managed Fund
Gartmore China Opportunities Fund
Gartmore Corporate Bond Fund
Gartmore Emerging Markets Opportunities Fund
Gartmore European Absolute Return Fund
Gartmore European Selected Opportunities Fund
Gartmore Global Focus Fund
Gartmore UK Absolute Return Fund
Gartmore UK Alpha Fund
Gartmore UK Equity Income Fund
Gartmore US Growth Fund
Gartmore US Opportunities Fund

For professional investors only. Not to be circulated to retail investors.

Gartmore Cautious Managed Fund

Review
All the worries of a year ago started to resurface in May. This time, though, with sovereign debt concerns rather than specific banking worries, although widening credit spreads and a sharp rise in LIBOR indicate that banks are by no means out of the woods. A surprise for many was the fact that UK Gilts (but not Sterling) became a relative safe haven, with 10-year gilt yields falling from 3.9% to 3.6%. Gold continued its climb, rising by another 3% over the month.

Declines in UK equities were widespread, with all FTSE sectors falling. Defensive businesses withstood the impact somewhat better than cyclicals. Industrial metals and mining suffered the largest drop, while the large oil & gas producers cost the most in index points. Much attention has been focused on BP since the Deepwater Horizon incident, and the slump in its share price was responsible for a significant proportion of the fall in the FTSE All-Share Index.

The Gartmore Cautious Managed Fund delivered a return of -3.2% for May, in line with the IMA Cautious Managed Sector Average. This brings the year to date performance to 1.1%, which is slightly ahead of the Sector Average.

Within the equity book, we benefited from the defensive positioning which we have maintained for some considerable time now. We had positive contributions from overweight exposure to AstraZeneca, BT, Dairy Crest and Communisis. We were underweight both BP and Shell, which also helped. There were some detractors too, such as an overweight in Lloyds, but overall the equity portion of the Fund outperformed the FTSE All-Share Index.

Our strategy regarding BP has been to build our position into further weakness. We think that the uncertainties over future litigation have led many investors simply to throw in the towel, the result being that the share price fall could now be significantly greater than the expected liabilities. If we are right, the shares could recover sharply as some of the short term sentiment starts to reverse. Vague thoughts of a bid for the company - a desperately unfortunate prospect - cannot be entirely discounted.

Otherwise we had a fairly quiet month in terms of activity, with just a few new names introduced. We started a new holding in Northern Foods and took two new corporate bond exposures: Rexam and Tullett Prebon. With prices in decline, we were able to take advantage of the opportunity to add to some of our existing holdings at attractive prices.

Outlook
Over the past month we have seen something of a change in investor sentiment, with the focus switching to negative news rather than the buoyantly positive reactions that have dominated over the past year. While corporate earnings have indeed been improving and balance sheets are healthier than they were 18 months ago, there is now, finally, some recognition that the improvement has been achieved at the expense of government balance sheets and greater fiscal deficits. How much the corporate sector can hang onto its gains in the face of public sector retrenchment is the crucial question for the next six months.

Despite seeing some good value emerging in a number of companies, we still do not see equities as a whole making much headway for now. We remain defensively positioned, seeing more value in corporate debt rather than equities and sovereign exposures.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. When a fund holds high yielding bonds there is an increased risk of capital erosion through default or if the underlying yield is below the distribution yield. You should also be aware that economic conditions and changes to interest rate levels may significantly impact the values of high yield bonds. The annual management fee is currently charged to the capital of the Fund. Whilst this increases the yield, it will restrict the potential for capital growth. The level of yield may be subject to fluctuation and is not guaranteed. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore China Opportunities Fund

Review
The Gartmore China Opportunities Fund ranked in the second percentile of the IMA Asia Pacific ex Japan Sector Average after falling by 1.4% over the month, while the MSCI Zhong Hua Index lost 0.6%. Year-to-date, the Fund has performed in the top quartile, rising 4.9%.

Overweight holdings in Ctrip, Baidu, Want Want, Kunlun and Wynn Macau all delivered the month's strongest returns. Ctrip's online ticketing franchise continues to benefit from the pick-up in domestic business and leisure travel. We expect the company to deliver strong earnings ahead of expectations. Baidu continues to perform strongly in the IT sector following Google's exit from China. Consumer staples company Want Want, which produces beverages, rice crackers and confectionary products, represents a long term holding in the Fund and continues to be a strong performer relative to its sector. Integrated downstream gas supplier Kunlun Energy benefited from strong demand in the clean energy industry. Wynn Macau moved higher after the gaming sector's headline gross gaming revenue increased 93% year-on-year or 20% month-on-month. Gaming revenues continue to be very robust despite evidence of liquidity tightening.

The Fund's overweight positions in Nine Dragons, Bosideng, China Agri and underweight in China Mobile all detracted from performance. Paper packaging company Nine Dragons suffered during the recent market volatility due to risk aversion and cyclical concerns. Menswear company Bosideng had a weak month as a result of profit taking following a strong run in April. We believe Bosideng continues to offer good value relative to its sector. Food products group China Agri underperformed due to concerns over soya bean crushing margins and possible delays in its parent group's restructuring. Despite being the largest holding in the portfolio at month end, we hold a small underweight in China Mobile relative to the benchmark. We believe the company continues to offer good value and has high levels of cash generation.

There was some portfolio activity over the month. We sold out of China Mengniu, Gome and MediaTek and invested the proceeds in large cap stocks, China Petroleum and China Mobile. After a year of underperformance, we see an attractive risk-reward trade off in large cap China stocks relative to small caps. We disposed of dairy producer China Mengniu following disappointing results. We sold the home electronics retailer Gome as a slower property market will likely hurt their sales going forward. We exited Taiwan after trimming our exposure to the technology hardware sector by disposing of MediaTek.

Outlook
The global macroeconomic outlook is mixed with positives from the US and negatives from Europe. Within China, growth is strong but moderating from the heights of the first quarter. Recent action by the authorities to reduce property prices is prudent but, together with a currency pegged to the strong dollar, is producing a tighter monetary environment, so we will continue to watch policy very closely.

Recent newsflow about rising wages doesn't surprise us. Wages have been rising for many years and their rises are a key part of encouraging domestic consumption, which is essential for global economic rebalancing. Labour disputes and strikes are not new either but their scale seems greater than before and we will monitor this going forward.

US macroeconomic data appears robust, while Europe is dealing with economic and political issues that look set to rumble on. Chinese economic activity is robust but concerns over tightening in the property sector have caused investors to take a more cautious approach. Notwithstanding many global macroeconomic uncertainties, we expect any pull-back in the Chinese market to present a good opportunity to top up our most compelling positions. We expect China to continue to benefit as a recovery gathers momentum and we remain confident that Chinese equities represent decent value. There are still many doubters on China which continues to offer the potential for unexpected earnings growth particularly within the consumer sector.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. The Fund can invest in smaller companies which can be more risky than investing in larger companies due to lack of liquidity and increased volatility. Emerging markets tend to be more volatile than more established stock markets and therefore your money is at greater risk. Other risk factors such as political and economic conditions should also be considered. Funds investing in overseas securities are exposed to and can hold currencies other than sterling. As a result, exchange rate movements may cause the value of investments to decrease or increase. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore Corporate Bond Fund



* Please note that the Gartmore Corporate Bond Fund was launched on 18.07.09 to receive the assets of the Rensburg Corporate Bond Trust (managed by John Anderson) on the merger of the two funds on 18.07.09. Performance figures prior to 18.07.09 reflect the performance of the Rensburg Corporate Bond Trust converted from an offer to offer basis to a mid to mid basis. The benchmark index changed to the iBoxx Sterling Non-Gilts Index on 18.07.09.

Performance
Over the month of May, the Gartmore Corporate Bond Fund returned -0.7%, compared to 0.0% for the iBoxx Sterling Non-Gilt Index and -0.7% for the IMA Sterling Corporate Bond Sector Average.

Economic and Market background
A much anticipated fiscal tightening by the new Con-Lib government coalition is likely to increase the pressure on the monetary authorities to keep rates on hold. It appears that they are now prepared to continue maintaining extremely low interest rates despite the current above-target level of inflation. The primary reason for this is their fear that raising rates will thwart any economic recovery from here on. We believe that, given the current economic environment, interest rates are likely to remain static for the foreseeable future, the expectation of which has underpinned the short-end of the yield curve.

Fears of an imminent default by Greece at the start of May triggered off a surge in risk aversion. Evidence of a flight to quality by investors was witnessed in the UK as 10-year gilt yields continued to fall below 4%. Continuing concerns over the Eurozone's sovereign debt crisis placed further downward pressure on higher quality government bond yields. Corporate bond spreads, meanwhile, began to widen as fears of contagion from the Eurozone debt crisis and economic uncertainty continued to grow.

Credit spreads, which offer a gauge for risk aversion, still do not appear to offer much in the way of value. Spreads on Sterling investment grade issues averaging around 120 basis points over gilts are now back at around the same levels that they were when Northern Rock collapsed in 2007 and, as such, can be seen as now offering more than fair value at best.

Investment Strategy
Mindful of the sovereign debt crisis, which continues to unfold, our focus has been on rebalancing the portfolio to reduce its overall exposure to the growing risks currently being felt in the market. We have increased our exposure to utilities and food retailers, whose non-cyclical nature offers excellent defensive qualities. Our focus has been on buying higher quality names, such as E.ON and Tesco, which fall into these sectors.

We have reduced our exposure to financials, including Tier 1's, which have come under further pressure from worries of financial contagion stemming from the Eurozone. Stresses on European interbank lending have also had a negative impact on financials. We cut positions in Barclays and Aviva, while on the other hand increased positions in quasi-sovereigns such as Network Rail and KFW, which have the advantage of implicit government support. At present, 10-year gilts are currently yielding around 3.5%, which in our view represents little value.

Outlook
Markets continue to remain volatile, with high levels of risk aversion. It is increasingly difficult to say, given the current economic climate, how markets will look six months from now. However, it is worth considering a few facts. Firstly, at current interest rate levels, the long-end does not appear to offer good value given the stubbornly high level of UK inflation. Secondly, at the short-end, yields remain extremely low due to heightened levels of risk aversion which fuelled a flight to quality, as well as the low probability of any future interest rate increases. We believe that the yield curve will remain steep for the foreseeable future.

We have yet to see if the Eurozone's proposed bailout of Greece will actually work. It is also not clear what the contagion affect will be on other Eurozone countries with large budget deficits. The Eurozone is the UK's largest trading partner and the full impact and severity of its sovereign debt crisis may not have yet fully revealed itself. However, such uncertainty is now being priced in by markets, which will remain nervous for some time to come.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. This Fund invests in bonds and other fixed income securities and derivatives which collectively may be more volatile than a fund investing solely in cash or bonds. The Fund may trade instruments which are not exchange traded and therefore contain the risk a counterparty may not be able to honour its contractual obligations. Currently, the annual management charge is taken from the capital of the Fund, which will increase the income yield, but restrict the potential for capital growth. Yields may change in the opposite direction to interest rates, however, not by the same increments. The Fund invests in corporate bonds whose prices are aligned with the credit worthiness of the underlying corporate. A deterioration in a corporate credit rating may have a negative impact on the bonds price. Derivatives may be used for the purpose of efficient portfolio management. However, appropriate risk monitoring will ensure that there is no significant increase in a fund's risk profile. Derivatives will not be used for investment purposes. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore Emerging Markets Opportunities Fund

Review
The Gartmore Emerging Markets Opportunities Fund fell by 6.1% over the month, while the MSCI Emerging Markets Index and the IMA Global Emerging Markets Sector Average lost 3.9% and 5.0% respectively.

A number of the Fund's overweight holdings performed well over the month, among them Baidu and Kunlun and the Fund's underweight in Hon Hai. China's top Internet search company Baidu surged higher after announcing that it aims to raise its share of China's PC and mobile search market to 79% next year, helped by a Google retreat. The Chinese search engine captured more than 64% of China's search market in the first quarter, up from 58% in the fourth quarter. Crude oil and natural gas explorer and producer Kunlun Energy rose higher after announcing that it would buy a 55% stake in PetroChina. Hon Hai fell after offering workers at its Foxconn unit in China a 66% performance-based pay rise, raising concerns over its earnings.

Our overweight positions in Grasim and MphasiS were among the Fund's key detractors over the month. Indian materials company Grasim fell over the month, after the Bombay Stock Exchange announced that the company will make an exit from the Sensex, BSE-100, BSE-200 and BSE-500 indices owing to the demerger of its cement business. Indian information technology company MphasiS also suffered over the month. As the Indian outsourcing industry is witnessing a turnaround and new orders are emerging, the relationship between MphasiS and Hewlett Packard may hurt MphasiS because of its overdependence on the US technology giant. Recently, MphasiS has experienced a cut in billing rates from Hewlett-Packard as the technology giant looked to bring rates more in line with industry levels, which had fallen during the slowdown.

There was a reasonable level of activity for the portfolio over the month. After a sustained period of underperformance and pursuant to our sell discipline, we sold out of Indian automobile company Maruti and reinvested the proceeds in Ashok Leyland. Ashok is a company which is continually under-researched and is very often rated a 'sell'. The company specialises in commercial vehicles, which recently reported a 65% annual unit growth rate as an industry, with Ashok's market share rising. Ashok's newest plant is in an excise tax haven, meaning the company's recent expansion will benefit from lower taxes. We expect the company to perform very well against imports and the higher priced offering from Tata.

Outlook
We remain confident of a shallow, yet broad-based recovery in the G7 nations during 2010. As the recovery takes hold, concerns over rising interest rates have caused investors to take a more cautious approach. Recent volatility in global equity markets continues to present good opportunities to top up our key positions. We expect China, Russia and Mexico to gain most from the recovery as it gathers momentum and are therefore maintaining a key overweight in these regions, whilst underweighting Israel and South Korea.

As improvements in global demand continue to assist the recovery in emerging economies, we expect to see improvements across our cyclical stocks. Meanwhile, we continue to favour consumer staples firms, such as Shoprite, and information technology companies, such as Baidu, whilst remaining neutral in financials.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. This Fund invests in emerging markets, which tend to be more volatile than more established stock markets and therefore your money is at greater risk. Funds investing in overseas securities are exposed to and can hold currencies other than sterling. As a result, exchange rate movements may cause the value of investments to decrease or increase. In addition, the Fund can invest in smaller companies which can be more risky than investing in larger companies due to lack of liquidity and increased volatility. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore European Absolute Return Fund

Review
Over the month of May, the Gartmore European Absolute Return Fund delivered -2.0%. The Fund is not managed against a benchmark and at present stock selection is the key driver to performance. Currently we do not hold a strong sector bias and are actively seeking investment ideas by adopting a bottom-up/stock specific approach.

The bullishness of March and April seems like a very distant memory, whilst equity markets were engulfed in a sense of 'déjà vu', with much higher volatility, dramatic mood swings and no shortage of ways of getting hurt. At the end of May, profit taking ultimately led to the European equity market ending down, with Germany once again materially outperforming peripheral Europe.

The local currency performance was compounded by the euro's heavy fall against the greenback in May. Robust corporate earnings and outlooks were pretty much ignored by the market, as the macro news kept the upper hand, making most European equity brokers become 'experts' of the Euro, VIX and CDS spreads.

During the month of May, on a gross basis the long book detracted -4.52%*.

The only noteworthy contributor on the long side was Vodafone, which the Fund purchased after its quarterly numbers, and after it transpired that the company had not embarked in overly onerous bidding for additional spectrum in both Germany and India. The main detractors of value on the long side were the small financials held in the Fund: BBVA, ING and Société Générale. Other detractors included Gestevision Telecinco, as Spanish stocks slumped on concerns that the rescue package for Greece won't be the last bailout in Southern Europe.

Outlook
Doubts remain over the ability of governments to reduce budget deficits and whilst we can only applaud the austerity packages, they leave many questions unanswered. For example, will they be enough? What negative impact will they have on unemployment and GDP growth? Will they be adhered to by the most undisciplined members of the Euro zone and what will be the social impact? However, we remain positive on Europe's outlook for several reasons. First of all, the valuation is compellingly cheap. Europe might just be a value trap, but with the exception of financials, the rest of Europe trades on a single digit P/E, and an average dividend yield which is comfortably above core Eurozone's long term bond yields. Secondly, balance sheets of European corporates are much healthier than that of Sovereigns and, as we have highlighted before, managements have done a great job at coping with the shortfall in top line growth. Last but not least, the weak euro is very supportive for European exporters. Headwinds still persist with China showing a few signs of slowing down, which would be very negative for global growth expectations, and the US economy rebounding strongly but at a very high cost - a mountain of debt. We will continue to seek good opportunities, but will also consciously look not to 'force things' as long as the environment does not reward stock picking. We remain confident that once the peak of uncertainty has passed, the environment for stock pickers will normalise again.

*Source: Gartmore/Vision as at 31.05.10

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. The Gartmore European Absolute Return Fund invests in shares and derivative instruments, which are more volatile than other asset classes such as cash or bonds. The Fund aims to typically deliver absolute (more than zero) returns in each year, although an absolute return performance is not guaranteed. Over the short-term it may experience periods of negative returns and consequently the Fund may not achieve this objective. The Fund may invest in smaller companies, which can be more risky than larger companies due to a lack of liquidity and increased volatility. The shares of smaller companies may be subject to more abrupt price movements than shares of larger companies. The investment approach for this Fund may involve a high level of investment activity and turnover of investments, which may generate substantial transaction costs which will be borne by the Fund. The Fund may invest in emerging markets which tend to be more volatile than more established markets and therefore your money could be at greater risk. Other risk factors such as political and economic conditions should be considered. As the Fund invests abroad, it is exposed to changes in exchange rates which may cause the value of investments to fall or rise independently of the underlying holdings. The Fund may try to offset the influence of foreign currency fluctuations on the performance of securities by hedging an equivalent amount in the currency markets. However, securities may be hedged on a best efforts basis and the Fund may have exposure to foreign currency fluctuations. The Fund may take short positions via derivatives with the aim of profiting from falling prices. If the price rises this would result in a loss. The Fund may be subject to a Performance Fee which may influence the manager to change the risk profile of the Fund. Please see the "Performance Fee" section in the Prospectus for further information. The Fund may trade instruments, the performance of which depends on the continued solvency of the counterparties to the trades. The Fund may employ leverage as part of its investment strategy when using derivatives. Derivatives may contain a leverage component and consequently any adverse changes in the value or level of the underlying asset, rate or index can result in a loss greater than the amount invested in the derivative itself. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore European Selected Opportunities Fund

Review
Over the month of May, the Gartmore European Selected Opportunities Fund returned -6.8%, outperforming the IMA Europe ex UK Sector Average (-7.3%) and the FTSE Developed Europe ex UK Index (-8.1%).

In a month dominated by difficult economic conditions and increased risk aversion, the portfolio benefitted from astute stock and sector selection. Over the month, the largest sector contributors to alpha came from the financials and consumer goods sectors. The portfolio's positive contribution from the financials sector reflects our substantial underweight to what we consider a highly vulnerable sector.

At the stock level our overweight holdings in Christian Dior, Beiersdorf and Siemens led the portfolio's top positive contributors to performance. Our position in Christian Dior performed well as the market continued to recognise the superior growth and cash flow profile of Europe's luxury goods sector. Christian Dior represents an example of the type of high quality blue chip franchise which we aim to identify for inclusion in the portfolio. Beiersdorf, the producer of skincare products under the Nivea brand, recouped earlier underperformance, while Siemens responded well to a number of broker upgrades. We have recently crystallised gains and reduced our holding in Siemens following strong performance from the stock.

Less successful was our overweight position in semiconductor manufacturer Infineon, which dragged on performance during the month. This merely reflects profit taking after a very strong run in the shares. We maintain our conviction in the stock and retain our holding. Elsewhere, our holdings in the oil services sector, namely Fugro and Petroleum Geo-Services, were also among the laggards during May as the sector weakened following events in the Gulf of Mexico.

Disposals during the month reflected our desire to reduce exposure to the oil services sector following the biggest oil spill in US history. With this in mind, we sold our holdings in CGG Veritas and Petroleum Geo-Services. We also disposed of Lafarge and Thyssenkrupp, as we sought to reduce the cyclical component of the Fund. New additions to the portfolio included Elekta and Essilor as we increased our exposure to the health care sector, a long term favourite. Our decision to add to this sector reflects our belief that Elekta and Essilor trade at compelling valuations and are a key source of unexpected earnings. Our activity during the month resulted in a reduction in the total number of names held in the portfolio.

Outlook
Our broad outlook and strategy remains unchanged. This reflects our style of money management and belief that it is unwise to make panic decisions during uncertain market conditions. Rather, we maintain that adhering to a tried and tested investment process is the right strategy to follow. At the sector level, we remain underweight the financials sector, most of which continue to look over-indebted as well as opaque in their accounting. Our long held overweight stance in the technology sector remains intact. While short term "beta" rallies in the likes of financials and cyclicals are inevitable, we continue to favour cash rich blue chips in sectors such as health, technology and consumer staples, and disfavour last year's winners such as banks and cyclicals. It is our view that the debt threat has not gone away. Instead it has merely shifted from corporates to sovereigns. This is also reflected in our geographic weightings, broadly favouring Northern Europe over Southern countries.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment Funds investing in overseas securities are exposed to and can hold currencies other than sterling. As a result, exchange rate movements may cause the value of investments to decrease or increase. In addition, the Fund can invest in smaller companies which can be more risky than investing in larger companies due to lack of liquidity and increased volatility. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore Global Focus Fund

Fund Performance
The Gartmore Global Focus Fund returned -5.4% in May, compared to the MSCI World Index return of -4.6%.

Market Review
May was an exhausting month for Global equities, with the MSCI World Index closing down 4.6%. But the decline was far from gentle: volatility spiked markedly as systematic macro economic concerns and stock-specific risks conspired, churning-out an unsettled and highly correlated market. The increased volatility was fuelled by bailouts, austerity packages, macro anxieties and a now infamous oil leak in the Gulf of Mexico. Not forgetting, of course, the 'flash crash' that briefly spooked the market.

On the macro side, country risk problems in Southern Europe - notably concerning Greece and Spain - continued to set the agenda. A raft of public sector cost saving measures was announced across the region, aimed at reducing budget deficits and rebuilding confidence in sovereign debt. The effects of tightening fiscal policies irked some investors worried about an already fragile recovery; but doubts in governments' ability to actually deliver the much needed cuts gained the ascendance.

Equities were further hit when German authorities introduced a unilateral ban on short-selling, which led to a large sell-off as investors questioned what other surprises regulators might have in store. Tension in Thailand and on the Korean Peninsula, political uncertainty in Japan, coalition talks in the UK, and fears of a slowdown in China further blighted the mood.

Key Performance Contributors
Among our holdings, Polo Ralph Lauren, the premium apparel manufacturer, contributed to performance. The stock won support after unveiling financial results that significantly beat market expectations. The consensus Q4 diluted EPS estimate from analysts was 64 cents; the actual figure came in at $1.13 on a stronger than expected rebound in retail and wholesale sales - a reflection of the company's strong brand, prudent balance sheet, competent management and increasingly successful entry into new markets, particularly Asia.

Apple, a core strategic holding, continues to impress with the month of May marking two major milestones: firstly, its market cap surpassed that of Microsoft, making it the world's largest technology company; and, secondly, sales of the iPad passed the one million mark - in shorter time, incidentally, than Apple's hugely successful iPhone. These numbers are testimony to Apple's powerful franchise and its increasing ability to drive consumer trends. Earnings repeatedly outflank market expectations and, according to a company press release, demand for its products currently exceeds supply.

Daimler, the maker of Mercedes-Benz cars and trucks, outperformed after announcing that it would end work-hour reductions a month earlier than planned due to stronger demand for its vehicles. Moreover, the market responded favourably to figures released during the month which showed that the company had gained market share; the weakening euro - a positive stimulus to export sales - provided further support.

Key Performance Detractors
Royal Dutch Shell was hit by the sector sell-off fuelled by the BP Macondo crisis. Shell operates five deep-water oil-rigs in the Gulf of Mexico and is likely to suffer temporarily from a US government moratorium on drilling. The drop in oil price added to downward momentum. But, with a healthy balance sheet, the prospect of increased oil demand, and an ability to grow the dividend, our conviction in Shell remains.

Samsung Electronics was marked-down on worries of increased tensions on the Korean Peninsula. Although performance was negative, it outperformed many of its competitors and continues to offer potential for earnings surprise.

Renault reversed along with much of the automotive sector. The stock declined as government 'cash for clunkers' schemes were unwound and fears of a continued slow-down in its key market, Europe, failed to abate.

Summary of Fund Activity
In May we added international mining giant Rio Tinto to the Fund, tactically taking advantage of weakness in the sector and encouraged by strong growth fundamentals - including attractive supply/demand dynamics in copper. Rio Tinto is especially well placed to capitalise on continued Chinese growth and global economic recovery. Furthermore, we believe that the stock had been oversold on fears of higher taxation rates in Australia.

Rolls-Royce was also added to the portfolio. Rolls-Royce exhibits significant upside potential with limited downside risk. The firm has a strong franchise, operates in an industry with particularly high barriers to entry and is increasing market share in the civil aerospace engine sector. We take a more positive view than the market on the outlook for global air-passenger numbers and, consequently, expect rising sales of wide-bodied aircraft; this should translate into increased demand for Rolls-Royce engines. Emirates' recent order of 32 A380s lends weight to this view.

China Construction Bank is one of China's largest banks. We bought the stock on the back of strong first quarter results which showed revenue growth of 15% and net profit up 34%. Earnings growth was mainly attributable to increases in commission income and a decrease in asset impairment losses. The bank has an improving non-performing loan book, attractive capital adequacy ratios, and offers value relative to the sector.

Samsung was trimmed during the month to marginally reduce our overweight position in technology. By the end of the month, we had sold Renault and switched into Daimler. Other sales included Oracle, Panasonic and General Dynamics Corporation.

We remain underweight industrials and energy, whilst being overweight information technology and consumer discretionary.

Outlook
Markets are indiscriminately pricing in a global economic slowdown stemming from Europe's sovereign debt problems, enforced fiscal tightening and measures taken by China to cool its economy. In addition, potential action by populist governments - think BP and its dividend, global banking levies, and the Australian commodities tax - perturbs investors concerned about the impact of such costs on profitability.

However, beyond the headlines, equity markets are becoming alluringly cheap: company balance sheets are, on the whole, much healthier than those of sovereigns; and management teams have done a great job cutting costs and coping with shortfalls in top-line sales growth. Investors are questioning, though, whether earnings forecasts are accurate given the risks of a slowdown. In order for equity markets to move higher, investors will need reassurance that the global economic recovery can withstand the withdrawal of monetary and fiscal stimulus, and that sovereign debt crises can be contained.

So, for the time being, top-down macro concerns will likely continue to eclipse positive corporate fundamentals. But, once the peak of uncertainty has passed, we remain confident that the environment for stock-pickers will normalise and unexpected earnings will, once again, be rewarded more fully.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10. The value of investments and the income from them may go down as well as up and you may not get back your original investment. Past performance is not a guide to future performance. Funds investing in overseas securities are exposed to and can hold currencies other than sterling. As a result, exchange rate movements may cause the value of investments to decrease or increase. The Fund is permitted to, and may hold, a limited number of investments from time to time. Should one or more of these investments decline or be otherwise adversely affected, it may have a more pronounced effect on the Fund's value than if a larger number of investments were held. In addition, the Fund can invest in smaller companies which can be more risky than investing in larger companies due to lack of liquidity and increased volatility. The views expressed are Gartmore's views as at 18.06.10 and are provided for information purposes only.

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Gartmore UK Absolute Return Fund


*The Fund launched on 14 April 2009.

Review
May proved to be a very difficult month for equity markets as many of the key concerns from April persisted or worsened. Fear of contagion from European sovereign debt problems pushed risk aversion higher once again and the VIX rose to the highest levels since March last year.

All FTSE sectors declined over the month, with defensive businesses bearing up somewhat better than cyclicals. Industrial metals and mining suffered the largest drop, while the large oil & gas producers cost the most in index points. BP's continuing woes in the Gulf of Mexico saw it shed another 14% over May, and Shell also reversed April's gains as oil prices dropped early in the month.

Market volatility shot up over the past month and while the Fund's volatility also rose it remains substantially below that of the market. The already low gross exposure was reduced again towards the end of the month to just over 60%. This is lower than our long term average for the strategy, and while markets remain in the current condition, will most likely stay around these low levels. Net exposure for May averaged 25%, although this was also reduced towards the end of the month, reaching 20% at month end.

The Gartmore UK Absolute Return Fund fell 1.9% during May, with a positive result from the short book and index positions outweighed by declines among the long positions. Starting with the positions that detracted this month, our long in Royal Dutch Shell was the poorest performer. Its share price dropped sharply at the start of the month as oil prices tumbled, triggered by a declining euro and fears that the European debt problems will dampen global growth prospects. Micro Focus also weakened despite releasing a solid trading statement, and our position has been maintained. C&C's share price was choppy throughout the month but ultimately ended around 11% lower despite announcing the sale of its spirits & liqueurs division for €300m, well above the consensus expectation.

More positive among the long positions was our exposure to gold companies, Centamin Egypt and African Barrick Gold.

Outlook
While markets persist with the current level of volatility, we expect to keep the gross exposure low and, as ever, net exposure will be determined by the number of long opportunities we find relative to the number of shorts.

Although the lack of differentiation between sectors and stocks is frustrating for our style, the volatility also uncovers new opportunities at a stock level. The positions that we are establishing now, in a similar vein to prior months, should benefit disproportionately in the coming months, as the picture becomes clearer and markets behave more rationally.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. The Gartmore UK Absolute Return Fund invests in shares and derivative instruments, which are more volatile than other asset classes such as cash or bonds. The Fund aims to typically deliver absolute (more than zero) returns in each year, although an absolute return performance is not guaranteed. Over the short term it may experience periods of negative returns and consequently the Fund may not achieve this objective. The Fund may invest in smaller companies, which can be more risky than larger companies due to a lack of liquidity and increased volatility. The shares of smaller companies may be subject to more abrupt price movements than shares of larger companies. The investment approach for this Fund may involve a high level of investment activity and turnover of investments, which may generate substantial transaction costs which will be borne by the Fund. This Fund primarily invests in a single market which can be subject to particular political and economic risks. The manager may invest in markets other than the primary market and the Fund may therefore be exposed to risks in these markets. The Fund may take short positions via derivatives with the aim of profiting from falling prices. If the price rises this would result in a loss. The Fund may be subject to a Performance Fee which may influence the manager to change the risk profile of the Fund. Please see the "Performance Fee" section in the Prospectus for further information. The Fund may trade instruments, the performance of which depends on the continued solvency of the counterparties to the trades. The Fund may employ leverage as part of its investment strategy when using derivatives. Derivatives may contain a leverage component and consequently any adverse changes in the value or level of the underlying asset, rate or index can result in a loss greater than the amount invested in the derivative itself. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore UK Alpha Fund

Review
May was a very tough month for equities. There was a continuation of the negative trend that began in April, with investors now choosing to see the negative in any story and focusing on some of the more outlandish, such as North Korea taking on the world. More important for investor sentiment has been the collapse in the BP share price following the Deepwater Horizon incident, which has been responsible for a significant proportion of the fall in the FTSE All-Share Index.

The Gartmore UK Alpha Fund delivered -9.1% over the month of May, compared to -6.2% from both the FTSE All-Share Index and the IMA UK All Companies Sector Average.

We were more active than usual this month, selling a number of holdings and opening quite a number of new positions including SDL, William Hill and Xstrata.

If May was difficult for equities, it was even more difficult for the Fund as a number of our positions fell significantly. Some of these followed negative newsflow and earnings downgrades. Yell Group was the largest detractor as earnings forecasts were downgraded. With this new information to hand, our original investment rationale was no longer valid and we have sold out of the position completely. Others in the same boat were 888 and Regus. We've sold the former, but we still have confidence in our decision to include Regus, and so have used the price weakness to add to the position.

A number of strong performers from April (such as Paragon, Yule Catto and Forth Ports, where a potential bid for the group fell through) gave back some of their gains and were among the detractors. Our investment case for Paragon and Yule Catto hasn't changed, and they were still among our largest overweights at the end of the month, but we've fully sold out of Forth Ports.

There were some positives too, particularly a small holding in gold miner Centamin Egypt. Centamin Egypt reported results for the first months of 2010 during May, with results positively received by the market. Rising gold prices also helped, as investors sought relative safe havens in the face of the European debt market worries.

We were underweight Royal Dutch Shell, and overweights in Senior, Dairy Crest and Holiday Break were all positive as they bucked the trend and delivered positive gains for the month.

Outlook
The events over the past month serve as a timely reminder that we mustn't get too carried away with a significant stance at present - either too bullish on recovery or too bearish - as there remains plenty of evidence of recovery and that economies are making progress gently. We remain of the view that we will witness a 'subdued recovery' in the UK, and are gearing the portfolio accordingly.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. The Gartmore UK Alpha Fund invests in shares, which are more volatile than other asset classes such as cash or bonds. The Fund may hold concentrated positions. If one of these concentrated positions declines in value, or is otherwise adversely affected, this can have a greater effect on the Fund's value than if it held less concentrated positions. The Fund may hold a limited number of investments. If one or more of these investments declines in value, or is otherwise adversely affected, this can have a greater impact on the Fund's value than if a larger number of investments were held. The Fund can invest in smaller companies which can be more risky than investing in larger companies due to lack of liquidity and increased volatility. Funds with an emphasis on a particular sector or geographical area are exposed to a higher risk of volatility than a fund which is more broadly diversified. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change. As of 4 January 2010, the name and objective of the Gartmore UK Alpha Fund was changed from the Gartmore UK Focus Fund.

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Gartmore UK Equity Income Fund

Review
May was another difficult month for equities as macroeconomic concerns dominated sentiment. Every FTSE sector fell and there was no clear differentiation between defensives and cyclicals. The oil majors were the biggest drag on the market, with BP falling some 14% as it failed in its initial attempts to stem or capture the flow of oil from its leaking well in the Gulf of Mexico.

The Gartmore UK Equity Income Fund delivered -6.0% in May, in line with the IMA UK Equity Income Sector Average and slightly ahead of the -6.2% return from the FTSE All-Share Index. Positions in AstraZeneca, GlaxoSmithKline and Rolls Royce fared relatively well and we benefited from underweight exposure to Shell and BP. We were more disappointed by the poor performance of stocks such as WM Morrison, BAE and Cobham, as we would have expected these to do well in a period of increasing risk aversion.

Activity was higher than average on the Fund. We trimmed a number of the more sizeable positions and reduced our weighting in industrial stocks via the disposal of Melrose. The proceeds from these sales were reinvested into two new holdings: McBride and Smith & Nephew.

McBride produces private label household and personal care products for over 90% of Europe's leading retailers. As long term owners of Unilever, we are well aware of the intense promotional activity being pursued by some of McBride's branded competitors. This competitive dynamic, alongside concerns over rising commodity costs, has pushed the valuation to levels we deem attractive. The yield is healthy and well covered, the balance sheet is strong and we feel the price can be justified at much lower margins than the company is currently delivering. We have initiated a position of c.1%.

Outlook
At macro level there is a shopping list of things to concern us: high levels of sovereign and consumer debt, dislocated credit markets, rising inflation, Chinese tightening, ongoing asset bubbles and potentially rising interest rates. With such issues in mind it seems remarkable to us that it's the "good quality" companies that are sitting on the more attractive valuations.

Pharmaceutical companies remain our largest positions. While the sector faces undeniable difficulties (genericisation, R&D productivity) we feel these are more than compensated by lowly ratings. From an income perspective, yields of over 5.5% are an added bonus.

The income from the Fund is well diversified across stocks and sectors and we feel positive on the prospects for dividend growth.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. The Fund can invest in smaller companies which can be more risky than investing in larger companies due to lack of liquidity and increased volatility. The annual management fee is currently charged to the capital of the Fund, which may restrict the potential for capital growth. Funds with an emphasis on a particular sector or geographical area are exposed to a higher risk of volatility than a fund which is more broadly diversified. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed in reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore US Growth Fund

Performance
Over the month of May the Gartmore US Growth Fund returned -3.3%, compared to a return of -3.1% for the S&P 500 Index and -3.9% for the IMA North America Sector Average. The Fund has also outperformed both the Index and Sector Average over the last three months, year to date, and also longer term over 1, 2, 3, 4, 5 and 10 years.

Market Review
The US large cap equity rally came to a screeching halt during May, rocked by massive investor uncertainty regarding the global economic growth outlook. This was exacerbated by a variety of macro level developments, ranging from the Eurozone government budget crisis (most prolifically, Greece) to a major oil spill in the Gulf of Mexico and rapidly mounting geopolitical tensions between North and South Korea.

Sector-level performance was unanimously in negative territory during May, with the most pronounced weakness occurring in energy, industrials and materials - three sectors that tend to be associated with global economic recovery. At an industry level, no group was spared a negative return during May, a clear indication of the high levels of risk aversion being felt by the US Equity market. The news was more or less the same across the market capitalisation and style spectrum with everything (small/medium/large; growth/value/core) down during the month and generally in a highly correlated fashion.

Contributors to Performance
The single biggest contributor to performance was made by Baidu, a provider of Chinese and Japanese language internet search services. Following Google's decision to move its Chinese site offshore, coupled with strong quarterly results, Baidu has gained considerable market share. Elsewhere, exposure to DIRECTV also contributed to gains. The group provides digital television services in the US and Latin American markets and is considered the world's No. 1 satellite provider with 18.7 million subscribers. The company benefitted after first quarter earnings nearly tripled compared to the same period last year.

Wells Fargo & Co. was one of the key detractors to performance over the month. It is the fourth largest bank holding company in the US and offers a full range of financial products and services, targeting all types of clients, from individuals to large corporations. Financials suffered considerably during May following a shock short selling ban in Germany on some financials and apparent stresses forming in European interbank lending. As a leading financial stock it is considered to be a bank too big to fail and its stock price has suffered as a result.

Fund Activity
During May we sold our position in MasterCard and Visa, following the Senate's decision to amend the financial regulation bill which would curb debit and credit card fees and allow merchants to set limits on card transactions. Our concern is that by allowing restrictions on when consumers can pay with plastic, the amendment would likely crimp revenues for credit card networks. We also cut our remaining position in Transocean, the owners of the wrecked Deepwater Horizon rig leased to BP, who have found themselves embroiled in the Gulf of Mexico oil spill tragedy. In addition, we have added Monsanto, the biotechnology firm, returning it to the Fund following the company's restructuring of its glyphosate division and a rise in global demand for agricultural seeds, a major part of the firm's business.

In terms of how the Fund is positioned, we are currently overweight in materials, consumer discretionary and information technology sectors. The Fund is also slightly overweight financials. These allocations are held principally at the expense of sectors with more defensive characteristics, notably consumer staples and utilities.

Outlook
Recent data has, in the main, pointed to incremental improvements in the US economy, despite high levels of volatility and risk aversion currently affecting Global Markets. For much of the world, including the US, the economic data points were not bad during May. In fact, a significant majority of them pointed to increased strength and a broadening recovery. These factors support our view that the US economy will recover this year, despite a backdrop of negative stock market performance that plagued US markets during May.

Arguably, a number of these shocks are short term and have been magnified by high levels of risk aversion. Flashpoint situations, such as the Gulf oil spill, the failed terrorist attack in New York and increasing tension between the two Koreas, will likely pass over the coming months. What are more worrying are the potential contagion concerns stemming from the sovereign debt crisis in the Eurozone. It is still unclear what the full affect will be on the US equity market. We are also yet to see whether the European Central Bank's (ECB) rescue plan for Greece will be effective and whether the ECB will be prepared to become a last resort lender in the same manner as the Federal Fund reserve.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. Funds investing in overseas securities are exposed to and can hold currencies other than sterling. As a result, exchange rate movements may cause the value of investments to decrease or increase. The Fund is permitted to, and may hold, a limited number of investments from time to time. Should one or more of these investments decline or be otherwise adversely affected, it may have a more pronounced effect on the Fund's value than if a larger number of investments were held. In addition, the Fund can invest in smaller companies which can be more risky than investing in larger companies due to lack of liquidity and increased volatility. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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Gartmore US Opportunities Fund

Performance
Over the month of May the Gartmore US Opportunities Fund returned -3.5%, compared to a return of -3.1% for the S&P 500 Index and -3.9% for the IMA North America Sector Average. The Fund has outperformed the Index and Sector Average over the last 3 and 6 months and also longer term over 1, 3 and 10 years.

Market Review
The US large cap equity rally came to a screeching halt during May, rocked by massive investor uncertainty regarding the global economic growth outlook. This was exacerbated by a variety of macro level developments, ranging from the Eurozone government budget crisis (most prolifically, Greece) to a major oil spill in the Gulf of Mexico and rapidly mounting geopolitical tensions between North and South Korea.

Sector-level performance was unanimously in negative territory during May, with the most pronounced weakness occurring in energy, industrials and materials - three sectors that tend to be associated with global economic recovery. At an industry level, no group was spared a negative return during May, a clear indication of the high levels of risk aversion being felt by the US Equity market. The news was more or less the same across the market capitalisation and style spectrum with everything (small/medium/large; growth/value/core) down during the month and generally in a highly correlated fashion.

Contributors to Performance
The single biggest contributor to performance was made by Williams-Sonoma, the US gourmet-cookware retailer. The group boosted its full-year profit forecast, excluding some items, to as much as US$1.48 a share, topping the average US$1.37 made by analysts. Another key contributor was retailer Rue21, which is a teen speciality retailer that sells youth and junior-sized clothing through mostly mall-based stores - it reported quarter profits which beat analyst expectations. The Chipotle Mexican Grill, which owns and operates quick-serve Mexican restaurants, was also a main contributor to returns, with good earnings and strong profit growth expected this year.

Wells Fargo & Co. was one of the key detractors to performance over the month. It is the fourth largest bank holding company in the US and offers a full range of financial products and services, targeting all types of clients, from individuals to large corporations. Financials suffered considerably during May following a shock short selling ban in Germany on some financials and apparent stresses forming in European interbank lending. As a leading financial stock, it is considered to be a bank too big to fail and its stock price has suffered as a result.

Fund Activity
During May we sold our position in MasterCard and Visa, following the Senate's decision to amend the financial regulation bill which would curb debit and credit card fees and allow merchants to set limits on card transactions. Our concern is that by allowing restrictions on when consumers can pay with plastic, the amendment would likely crimp revenues for credit card networks. In addition, we have added Monsanto, the biotechnology firm, returning it to the Fund following the company's restructuring of its glyphosate division and a rise in global demand for agricultural seeds, a major part of the firm's business.

In terms of how the Fund is positioned, we are currently overweight in materials, consumer discretionary and information technology sectors. The Fund is also slightly overweight financials. These allocations are held principally at the expense of sectors with more defensive characteristics, notably consumer staples and utilities.

Outlook
Recent data has, in the main, pointed to incremental improvements in the US economy, despite high levels of volatility and risk aversion currently affecting Global Markets. For much of the world, including the US, the economic data points were not bad during May. In fact, a significant majority of them pointed to increased strength and a broadening recovery. These factors support our view that the US economy will recover this year, despite a backdrop of negative stock market performance that plagued US markets during May.

Arguably, a number of these shocks are short-term and have been magnified by high levels of risk aversion. Flashpoint situations, such as the Gulf oil spill, the failed terrorist attack in New York and increasing tension between the two Koreas, will likely pass over the coming months. What are more worrying are the potential contagion concerns stemming from the sovereign debt crisis in the Eurozone. It is still unclear what the full affect will be on the US equity market. We have also yet to see whether the European Central Bank's (ECB) rescue plan for Greece will be effective and whether the ECB will be prepared to become a last resort lender in the same manner as the Federal Fund reserve.

Important Information
Source for all fund performance data: Lipper. Basis: Mid to mid, net income reinvested and net of fees in UK sterling terms as at 31.05.10, unless otherwise stated. Past performance is not a guide to future performance. The value of investments can go down as well as up and you may not get back your original investment. Funds investing in overseas securities are exposed to and can hold currencies other than sterling. As a result, exchange rate movements may cause the value of investments to decrease or increase. The Fund may, from time to time, be significantly invested in smaller companies which may be more risky than investing in larger companies due to lack of liquidity and increased volatility. The Fund is permitted to, and may hold, a limited number of investments from time to time. Should one or more of these investments decline or be otherwise adversely affected, it may have a more pronounced effect on the Fund's value than if a larger number of investments were held. Please ensure your clients read the Simplified Prospectus before investing. The opinions expressed reflect Gartmore's views as at 18.06.10 and are subject to change.

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