Exhibit 23(h)(18)
EXPENSE LIMITATION AGREEMENT
GARTMORE MUTUAL FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of October 1, 2002 by and
between GARTMORE MUTUAL FUND CAPITAL TRUST (the "Investment Adviser") and
GARTMORE MUTUAL FUNDS (the "Trust"), an Ohio business trust, on behalf of each
of the funds listed on Exhibit A (each, a "Fund").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open end management company of the series
type, and each Fund is a series of the Trust; and
WHEREAS, the Trust and the Investment Adviser have entered into an
Investment Advisory Agreement (the "Advisory Agreement"), pursuant to which the
Investment Adviser will render investment advisory services to the Fund for
compensation based on the value of the average daily net assets of the Fund; and
WHEREAS, the Trust and the Investment Adviser have determined that it is
appropriate and in the best interests of the Fund and its shareholders to
maintain the expenses of the Fund at a level below the level to which the Fund
would be subject .
NOW, THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
-------------------
1.1. Applicable Expense Limit. To the extent that the aggregate expenses
--------------------------
of every character incurred by a Fund or a class of a Fund in any fiscal year,
including but not limited to investment advisory fees of the Investment Adviser
(including interest, taxes, brokerage commissions and other expenditures which
are capitalized in accordance with generally accepted accounting principles and
other extraordinary expenses not incurred in the ordinary course of the Fund's
business) ("Fund Operating Expenses"), exceed the Operating Expense Limit, as
defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be
the liability of the Investment Adviser.
1.2. Operating Expense Limit. The Operating Expense Limit in any year
-------------------------
shall be a percentage of the average daily net assets of each class of the Fund
as described in Exhibit A, or such other rate as may be agreed to in writing by
the parties. The parties hereby agree that Operating Expense Limit described in
Exhibit A will not be increased before the date listed on Exhibit A.
1.3. Method of Computation. To determine the Investment Adviser's
-----------------------
liability with respect to the Excess Amount, each month the Fund Operating
Expenses shall be annualized as of the last day of the month for each class of a
Fund. If the annualized Fund Operating Expenses for any month exceed the
Operating Expense Limit of a Fund class, the Investment Adviser shall (i) waive
or reduce its advisory fee by an amount sufficient to reduce the annualized Fund
Operating Expenses to an amount which does not exceed the Operating Expense
Limit, and/or (ii) remit to a Fund an amount that, together with the waived or
reduced advisory fee, is sufficient to satisfy such Excess Amount.
1.4. Year-End Adjustment. If necessary, on or before the last day of the
--------------------
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the advisory fees waived or
reduced and other payments remitted by the Investment Adviser to a Fund with
respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
-------------------------------------------------------
2.1. Reimbursement. If in any fiscal year during which total Fund assets
-------------
are greater than $100 million and in which the Investment Advisory Agreement is
still in effect, the estimated aggregate Fund Operating Expenses for the fiscal
year are less than the Operating Expense Limit for that year, subject to
quarterly approval by the Trust's Board of Trustees as provided in Section 2.2
below, the Investment Adviser shall be entitled to reimbursement by a Fund, in
whole or in part as provided below, of the advisory fees waived or reduced and
other payments remitted by the Investment Adviser to the Fund pursuant to
Section 1 hereof. The total amount of reimbursement to which the Investment
Adviser may be entitled (the "Reimbursement Amount") shall equal, at any time,
the sum of all advisory fees previously waived or reduced by the Investment
Adviser and all other payments remitted by the Investment Adviser to a Fund,
pursuant to Section 1 hereof, less any reimbursement previously paid by such
Fund to the Investment Adviser, pursuant to Sections 2.2 or 2.3 hereof, with
respect to such waivers, reductions, and payments; provided, however, that no
Reimbursement Amount shall be paid at a date more than three (3) years after the
fiscal year when the Investment Adviser waived investment advisory fees or
reimbursed other expenses to a Fund for the corresponding Excess Amount pursuant
to Section 1. The Reimbursement Amount shall not include any additional charges
or fees whatsoever, including, e.g., interest accruable on the Reimbursement
Amount.
2.2. Board Approval. No reimbursement shall be paid to the Investment
---------------
Adviser pursuant to this provision in any fiscal year, unless the Trust's Board
of Trustees has determined that the payment of such reimbursement is appropriate
in light of the terms of this Agreement. The Trust's Board of Trustees shall
determine quarterly in advance whether any portion of the Reimbursement Amount
may be paid to the Investment Adviser in such quarter.
2.3. Method of Computation. To determine a Fund's payments, if any, to
-----------------------
reimburse the Investment Adviser for all or any portion of the Reimbursement
Amount, each month the Fund Operating Expenses for each Fund class shall be
annualized as of the last day of the month. If the annualized Fund Operating
Expenses for any month are less than the Operating Expense Limit, a Fund, only
with the prior approval of the Board, shall pay to the Investment Adviser an
amount sufficient to increase the annualized Fund Operating Expenses to an
amount no greater than the the Operating Expense Limit, provided that such
amount paid to the Investment Adviser will not exceed the total Reimbursement
Amount. If the annualized Fund Operating Expenses for a Fund are greater than
the Operating Expense Limit for one or more months in a quarter and less than
the remaining month(s), the calculation described in this section will be made
on a monthly basis and the net amount of the monthly calculations will be
presented to the Board for approval.
2.4. Year-End Adjustment. If necessary, on or before the last day of the
--------------------
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the actual Fund Operating Expenses for the prior
fiscal year (including any reimbursement payments hereunder with respect to such
fiscal year) do not exceed the Operating Expense Limit.
2
3. Term and Termination of Agreement.
---------------------------------
This Agreement shall continue in effect for the period listed on Exhibit A
for any Fund covered by the Agreement and from year to year thereafter provided
such continuance is specifically approved by a majority of the Trustees of the
Trust who (i) are not "interested persons" of the Trust or any other party to
this Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect
financial interest in the operation of this Agreement ("Non-Interested
Trustees"), provided however, that the reimbursements described in Section 2
will not continue to accrue for more than three years after the fiscal year when
the Investment Adviser waived investment advisory fees or reimbursed other
expenses to a Fund for the corresponding Excess Amount pursuant to Section
1After the period listed on Exhibit A has passed, this Agreement may be
terminated by the Investment Adviser, without the payment of any penalty, upon
60 days' prior written notice to the other party at its principal place of
business.
4. Miscellaneous.
-------------
4.1. Captions. The captions in this Agreement are included for convenience
--------
of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require
--------------
the Trust or a Fund to take any action contrary to the Trust's Agreement and
Declaration of Trust or By-Laws, or any applicable statutory or regulatory
requirement to which it is subject or by which it is bound, or to relieve or
deprive the Trust's Board of Trustees of its responsibility for and control of
the conduct of the affairs of the Trust or the Fund.
4.3. Definitions. Any question of interpretation of any term or provision
-----------
of this Agreement, including but not limited to the investment advisory fee, the
computations of net asset values, and the allocation of expenses, having a
counterpart in or otherwise derived from the terms and provisions of the
Advisory Agreement or the 1940 Act, shall have the same meaning as and be
resolved by reference to such Advisory Agreement or the 1940 Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
GARTMORE MUTUAL FUNDS
By: /s/ XXXXX XXXXXXXXX
Name: Xxxxx Xxxxxxxxx
Title: Assistant Secretary
GARTMORE MUTUAL FUND CAPITAL TRUST
By: /s/ XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: SVP - CAO
3
EXHIBIT A
to the Expense Limitation Agreement between
GARTMORE MUTUAL FUNDS
and
GARTMORE MUTUAL FUND CAPITAL TRUST
As of October 1, 2002
Name of Fund/Class Expense Limitation for Fund/Class*
----------------------------------------------------------------------------
Gartmore Mid Cap Growth Fund
Class A 1.15%
Class B 1.15%
Class C 1.15%
Institutional Service Class 1.15%
Institutional Class 1.15%
*Effective until at least October 1, 2003.
4
